Tata Motors - Increasing Focus On EVs, Profitability: Prabhudas Lilladher

Prabhudas Lilladher Report

We attended Tata Motors Ltd.’s India Investor Day and came out positive on the company's India strategy. Management highlighted continued growth in the commercial vehicle and passenger vehicle segment but with moderation in the growth rate.

Medium and heavy commercial vehicle demand outlook is strong and Tata Motors is confident of maintaining its lead in sports utility vehicles.

We liked the strong focus on the margins across division to grow in a profitable manner by disrupting standard industry practices in the CV segment. EVs have become a big focus point for Tata Motors with a separate session being planned for highlighting increased awareness within the company related to climate change and holistic measures being adopted by the company to become net zero by 2040 in PV and 2045 in CV division.

We remain positive on Tata Motors given-

1. Jaguar Land Rover’s volume ramp-up resulting in strong revenue, profitability and free cash flow (aided by high order book),

2. commercial vehicle segment (on domestic side) benefitting from ongoing upcycle, operating leverage and tailwinds from lower commodity costs and lower discounting and

3. strong market share in PV segment (13.5% versus 8% in FY21) led by revamped portfolio, rising SUV share and rising EV penetration.

We expect revenue/Ebitda compound annual growth rate of 12%/32% over FY24/25E.

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