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TATA MOTORS LTD. CMP: 434

Tata Motors (TML) owns Jaguar Land Rover (JLR) and is the market leader in commercial vehicles (CVs) space. TML is expected to perform well on account of turnaround in volumes in the standalone business and owing to improving JLR volumes. Margin improvement (favourable JLR launch cycle), cost savings post start of Slovakia plant and expiry of major portion of unfavourable hedges in coming year would drive overall profitability. Expect revenue and PAT to post 12% and 38% CAGR respectively.
TML, on the consolidated level, derives 80% of its revenue from wholly owned subsidiary, JLR, which had witnessed EBITDA margin decline in FY16 and FY17 on account of weakness in volumes growth, model mix and forex losses. Standalone business (80%) Commercial Vehicles (CV) and Passenger Vehicles (PV) has experienced market share losses and is expected to turnaround the trend on account of better acceptance of SCR technology (CV) and series of new launches in PV segment (Tigor/Hexa/Tiago).

Expect JLR volumes to improve on account of three new launches over F18-19E. Steady improvement in market share in both standalone CV and PV segments would drive 12% revenue CAGR over FY17-20E. EBITDA margin expansion of 120bps is expected owing to cost benefits from Slovakia plant, internal restructuring of domestic operations, and lower forex loss post FY18E. Consequently, we expect PAT to grow at 38% CAGR over FY17-20E.
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