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Tata Motors Ltd. printed a stellar number in Q1 led by a strong show at Jaguar Land Rover.
JLR’s Ebitda margin stood at 16.3 % (+170 basis points QoQ) led by commodity tailwind, strong model mix, and operating leverage benefit. Commercial vehicles and passenger vehicles margin stood at 9.4/5.3% respectively.
JLR – Q2 production to be lower than Q1 as two-week holiday would impact production and cash flow but wholesale volume and profitability remain same as in recent quarters.
Management is confident to achieve volume guidance of 400,000 units for FY24 in the light of a strong underlying demand and strong order backlog.
We expect PVs business (JLR and India PVs) continue to be on strong growth trajectory led by strong order backlog and low inventory at dealer level.
India CV business to improve QoQ basis with ramp up in production.
We increase JLR Ebitda estimate by 16/13% for FY24/25E factoring in improvement in margin.
In light of increasing earning visibility we believe JLR deserves a rerating hence we increase our one year forward enterprise value/ Ebitda multiple from three times to 3.5 times and consequently increase our SOTP based target price from Rs 611 to 753.
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