RESULTS REVIEW 3QFY17 16 FEB 2017

Tata Motors
BUY
INDUSTRY AUTOS Weakness persists; but faith intact
CMP (as on 15 Feb 2017) Rs 436 Tata Motors (TTMT) 3QFY17 performance was Highlights of the quarter
disappointing due to weakness in both JLR as well as Domestic business recovery underway: The
Target Price Rs 516 domestic business. JLRs EBITDA margin stood at management indicated that the new launch of Hexa
Nifty 8,725 9.3%, down 500bps YoY impacted by an adverse has received good response, and has a waiting period
Sensex 28,156 product mix and higher discounting (Discovery run- of 2 months. The launch pipeline also looks strong with
out in US). However, if revenue is adjusted to include Tata Tigor and Nexon. Overall growth momentum for
KEY STOCK DATA
forex hedging gains, margins would be ~10.1%. The tippers and buses is expected to continue in FY18. The
Bloomberg TTMT IN management targets to procure 60% market share
India business lost ground with an EBITDA margin of
No. of Shares (mn) 3,396 1.5%, driven down by a weak mix and higher (from ~55% currently) over the next 2 years, led by the
MCap (Rs bn) / ($mn) 1,484/22,167 discounts. launch of the new Signa range of trucks.
6m avg traded value (Rs mn) 3,993
The management sounded confident of volume JLR business setback: Management guided that the
STOCK PERFORMANCE (%) momentum sustaining in JLR/India, in the light of a hedging losses of GBP 450mn could continue for the
52 Week high / low Rs 599 / 290 next few quarters. Overall, the management has
strong launch pipeline. However, in the near term,
maintained its medium-term margin guidance of 14-
3M 6M 12M margins are likely to be under pressure. In India, the
15%. However, in the short term, JLR will continue to
Absolute (%) (4.6) (15.5) 37.6 management has taken steps to improve profitability
face headwinds owing to currency hedges. Model mix
Relative (%) (11.6) (15.6) 18.0 and market share in the CV business. is likely to turn favourable as Discovery would be
SHAREHOLDING PATTERN (%) We cut our FY18/FY19 estimates to factor weak launched in Q4FY17, thereby improving margins.
Promoters 33.01 operating performance in India, lower margin Near-term outlook: We expect 4Q JLR volumes to be
FIs & Local MFs 16.54 expansion for JLR, and cut in profitability estimates strong, driven by the launch of the new Discovery.
FPIs 24.21 for the China JV. We maintain BUY with a revised Management has indicated that MHCV volumes will be
SOTP-based TP is Rs 516. strong in 4Q, to end FY17 on a flat note.
Public & Others 26.24
Source : BSE Consolidated Financial Summary
(Rs bn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%) FY16 FY17E FY18E FY19E
Sneha Prashant Net Sales 675 723 (6.5) 659 2.5 2,756 2,728 3,137 3,545
sneha.prashant@hdfcsec.com EBITDA 60 102 (41.6) 70 (14.9) 374 347 469 540
+91-22-6171-7336 APAT 1 35 (96.8) 8 (86.8) 138 117 168 184
Diluted EPS (Rs) 0.3 10.3 (96.8) 2.5 (86.8) 40.6 34.5 49.3 54.2
P/E (x) 11.9 14.0 9.8 8.9
Abhishek Jain EV / EBITDA (x)* 5.5 6.8 4.7 2.9
abhishekkumar.jain@hdfcsec.com RoE (%) 20.1 13.6 16.9 15.9
+91-22-6171-7320 Source: Company, HDFC sec Inst Research. * EV/EBITDA on adjusted basis please refer page to page 11 for details
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters
 TATA MOTORS: RESULT REVIEW 3QFY17

Quarterly Financials Snapshot (Consolidated)

Particulars 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%)
Net Sales 675,313 722,564 (6.5) 659,004 2.5
Consolidated top line was
Material Expenses 400,123 435,890 (8.2) 392,758 1.9
below expectations, led by
weak operations of both Employee Expenses 70,446 74,380 (5.3) 67,939 3.7
divisions - domestic and JLR Other Operating Expenses 144,991 109,930 31.9 128,062 13.2
EBITDA 59,753 102,365 (41.6) 70,245 (14.9)
Depreciation 42,300 43,391 (2.5) 44,540 (5.0)
EBIT 17,454 58,974 (70.4) 25,705 (32.1)
FX realised losses increased Other Income 1,674 1,806 (7.3) 1,794 (6.7)
QoQ (GBP455mn in Q3FY17 Interest Cost 8,707 10,915 (20.2) 10,249 (15.0)
versus GBP274mn in Q2FY17) Product Development Cost 8,141 8,565 (5.0) 7,420 9.7
since GBP weakened by 5% to PBT 2,280 41,300 (94.5) 9,831 (76.8)
the USD during the quarter Tax 8,670 6,513 33.1 4,246 104.2
RPAT (6,390) 34,787 (118.4) 5,585 (214.4)
Share of profits in associates/JVs 3,799 36 10,602.3 2,735 38.9
EO Items (Adj For Tax) (3,706) (457) 711.0 (162) 2,192.1
APAT 1,116 35,075 (96.8) 8,482 (86.8)
Adj EPS 0.3 10.3 (96.8) 2.5 (86.8)
Source: Company, HDFC sec Inst Research

Margin Analysis (Consolidated)

3QFY17 3QFY16 YoY (bps) 2QFY17 QoQ (bps)
Material Expenses As % Of Net Sales 59.2 60.3 (108) 59.6 (35)
Employee Expenses As % Of Net Sales 10.4 10.3 14 10.3 12
Other Expenses As % Of Net Sales 21.5 15.2 626 19.4 204
EBITDA Margin (%) 8.8 14.2 (532) 10.7 (181)
Net Profit Margin (%) 380.3 15.8 36,454 43.2 33,712
Tax Rate (%) 0.2 4.9 (469) 1.3 (112)
Source: Company, HDFC sec Inst Research

Page | 2
 TATA MOTORS : RESULT REVIEW 3QFY17

Quarterly Financials Snapshot (Standalone)

(Rs mn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%)
Realisations declined 6% YoY
CV (Domestic, in units) 74,808 78,294 (4.5) 73,857 1.3
to Rs 770k/unit, due to
PV (Domestic, in units) 40,771 31,384 29.9 43,359 (6.0)
adverse product mix amid
high variable marketing Exports (in units) 17,078 12,699 34.5 17,653 (3.3)
expenses Total volumes (in units) 132,657 122,377 8.4 134,869 (1.6)
Net Sales 102,199 100,006 2.2 103,225 (1.0)
Material Expenses 74,791 71,596 4.5 74,225 0.8
EBITDA margins stood at Employee Expenses 8,454 7,811 8.2 8,817 (4.1)
1.5%, a decline of 418bps YoY Other Operating Expenses 17,420 14,913 16.8 16,422 6.1
owing to impact of EBITDA 1,534 5,686 (73.0) 3,761 (59.2)
demonetisation, higher raw Depreciation 7,290 6,054 20.4 7,186 1.4
material prices and increasing EBIT (5,756) (368) 1,464.4 (3,425) 68.0
discounting in the M&HCV Other Income 940 4,733 (80.1) 1,460 (35.7)
segment, despite strong PV Interest Cost 4,137 3,456 19.7 3,728 11.0
volumes led by Tiago Product Development Cost 770 1,073 (28.3) 699 10.1
PBT (9,723) (164) 5,817.7 (6,391) 52.1
Tax 143 (24) (704.6) 218 (34.4)
RPAT (9,866) (141) 6,917.1 (6,610) 49.3
Management expects M&HCV EO Items (Adj For Tax) 593 1,868 (68.3) (302) (296.3)
market share to return to APAT (9,866) (141) 6,917.1 (6,610) 49.3
~60% over next 2 years v/s Adj EPS (3.1) (0.0) 6,917.1 (2.1) 49.3
current market share of 55% Source: Company, HDFC sec Inst Research
through the new range of
Signa trucks Margin Analysis (Standalone)
3QFY17 3QFY16 YoY (bps) 2QFY17 QoQ (bps)
Material Expenses % Net Sales 73.2 71.6 159 71.9 128
Employee Expenses % Net Sales 8.3 7.8 46 8.5 (27)
Other Operating Expenses % Net Sales 17.0 14.9 766.8 15.9 114
EBITDA Margin (%) 1.5 5.7 (418) 3.6 (214)
Tax Rate (%) (1.5) 14.4 (1,590) (3.4) 194
APAT Margin (%) (9.7) (0.1) (951) (6.4) (325)
Source: Company, HDFC sec Inst Research

Page | 3
 TATA MOTORS : RESULT REVIEW 3QFY17

Quarterly Financials Snapshot (JLR - IFRS)

Run down of outgoing In GBP mn 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%)
Discovery, discontinuation of Retail Volumes (000 units) 901.4 137.7 554.9 142.5 532.8
Defender, higher production Wholesale Volumes Ex-CJLR (000 units) 129.8 137.6 (5.7) 124.2 4.5
in China JV and fairly muted Revenue 6,537 5,781 13.1 5,953 9.8
Range Rover sales resulted in Material Expenses 3,869 3,496 10.7 3,527 9.7
a 5% drop in wholesale Employee Expenses 648 582 11.3 585 10.8
volumes Other Operating Expenses 1,788 1,192 50.0 1,597 12.0
Product Development Expense (379) (323) 17.3 (371) 2.2
EBITDA 611 834 (26.7) 615 (0.7)
Interest Cost 5 10 (50.0) 7 (28.6)
EBDITA margins plummeted Depreciation 409 357 14.6 410 (0.2)
sharply owing to higher Debt/Unrealised MTM Loss/(Gain) (62) 20 (410.0) (50) 24.0
RM costs due to a weaker mix Share Of Profit/(Loss) From JV 35 22 59.1 33 6.1
and higher incentives (50bps PBT 294 469 (37.3) 281 4.6
higher QoQ), higher employee Exceptional Item 85 30 183.3 (1) (8,600.0)
costs due to one-time Tax 88 59 49.2 36 144.4
provisions (40bps) and other RPAT 206 410 (49.8) 245 (15.9)
expenses due to costs APAT 291 440 (33.9) 244 19.3
incurred for launch of a new Source: Company, HDFC sec Inst Research

model
(30bps), as well as a much Margin Analysis (JLR IFRS)
higher-than-expected 3QFY17 3QFY16 YoY (bps) 2QFY17 QoQ (bps)
hedging loss Material Expenses As % Of Net Sales 59.2 60.5 (128.8) 59.2 (6.1)
Employee Expenses As % Of Net Sales 9.9 10.1 (15.5) 9.8 8.6
Other Expenses As % Of Net Sales 27.4 20.6 673.3 26.8 52.5
EBITDA Margin (%) 9.3 14.4 (508.0) 10.3 (98.4)
Net Profit Margin (%) 3.2 7.1 (394.1) 4.1 (96.4)
Tax Rate (%) 29.9 12.6 1,735.2 12.8 1,712.1
Source: Company, HDFC sec Inst Research

Page | 4
 TATA MOTORS : RESULT REVIEW 3QFY17

JLR: Key Financial Highlights / Model Assumptions

in Mn FY15 FY16 FY17E FY18E FY19E
Revenue 21,866 22,208 24,134 27,750 36,158
We have cut our FY17/18E % YoY 12.8 1.6 8.7 15.0 30.3
volume and EBITDA estimates Wholesales Volumes Incl CJLR (in '000) 471 544 532 586 655
on lower volumes and fx % growth 9.5 15.6 (2.2) 10.2 11.6
hedging losses Net ASP 46,875 43,602 46,057 46,805 55,240
% YoY 3.9 (7.0) 5.6 1.6 18.0
Expenditure
Outlook for JLR volume Material Cost 13,185 13,146 15,011 17,067 22,563
% Of Sales 60.3 59.2 62.2 61.5 62.4
growth appears healthy with
Employee Cost 1,977 2,321 2,655 2,969 3,254
its new product cycle % Of Sales 9.0 10.5 11.0 10.7 9.0
Other Expenses 3,730 4,670 5,068 5,550 6,147
% Of Sales 17.1 21.0 21.0 20.0 17.0
Add back R&D Cost (1,411) (1,560) (1,750) (1,820) (1,500)
% Of Sales (6.5) (7.0) (7.3) (6.6) (4.1)
R&D Cost Expensed 253 318 350 364 270
Total 17,734 18,895 21,334 24,130 30,734
% Of Sales 81.1 85.1 88.4 87.0 85.0
EBITDA 4,132.0 3,313.0 2,799.8 3,620.5 5,424.3
EBITDA margin % 18.9 14.9 11.6 13.0 15.0
Other Income - - - - -
Depreciation And Amortisation 1,051 1,403 1,655 1,834 2,153
Interest Expense 87 54 45 45 19
Forex gain/(loss) (373) (27) - - -
Share Of Profit/(Loss) From Joint Venture (7) 66 111 170 -
% Of Sales (0.0) 0.3 0.5 0.6 -
PBT 2,614 1,895 1,211 1,911 3,253
% Of Sales 12.0 8.5 5.0 6.9 9.0
Tax 576 247 267 422 862
Tax rate % 22.0 13.0 22.0 22.1 26.5
APAT 2,038 1,649 944 1,489 2,391
% Of Sales 9.3 7.4 3.9 5.4 6.6
RPAT 2,038 1,326 944 1,489 2,391
% Of Sales 9.3 6.0 3.9 5.4 6.6
Source: Company, HDFC sec Inst Research

Page | 5
 TATA MOTORS : RESULT REVIEW 3QFY17

Standalone: Key Financial Highlights/ Model Assumptions

Rs in Mn FY15 FY16 FY17E FY18E FY19E
Vehicle Sales (in units)
Expect healthy volume CV (Domestic) 329,943 327,730 327,735 360,783 408,961
growth in the PV segment for PV (Domestic) 133,304 125,945 146,650 171,206 191,942
TTMT in FY17, while the Exports 49,917 57,991 66,077 69,601 76,207
complete cyclical revival in Total 513,164 511,666 540,462 601,590 677,111
CVs is yet to play out % YoY (9.4) (0.3) 5.6 11.3 12.6
Net Sales 358,905 419,480 442,323 494,706 583,108
% YoY 5.8 16.9 5.4 11.8 17.9
Other Operating Income 4,042 4,218 4,640 5,104 5,614
Total Income From Operations 362,948 423,698 446,963 499,810 588,723
Expenditure
RM Cost 270,417 295,953 313,768 339,371 406,219
% Of Sales 75.3 70.6 70.9 68.6 69.7
Employee Cost 30,915 30,267 34,564 38,200 41,136
% Of Sales 8.6 7.2 7.8 7.7 7.1
Other 66,518 70,076 78,654 85,775 92,384
% Of Sales 18.5 16.7 17.8 17.3 15.8
Total Expenses 367,849 396,296 426,985 463,346 539,739
% Of Sales 94.0 85.7 87.5 84.9 83.8
EBITDA (4,901) 27,402 19,977 36,464 48,984
EBITDA Margin % (1.4) 6.5 4.5 7.4 8.4
Other Income 18,815 14,765 17,188 17,645 17,877
Product Development Expenses 4,375 4,246 4,500 5,000 5,600
Depreciation 26,032 24,538 27,492 29,960 29,920
Interest 16,117 14,811 13,196 12,889 9,966
PBT (Pre-exceptional Items) (32,610) (1,427) (8,023) 6,260 21,376
PBT (Pre-exceptional And JLR Dividend) (47,460) (15,745) (22,423) (8,140) 21,376
Source: Company, HDFC sec Inst Research

Page | 6
 TATA MOTORS : RESULT REVIEW 3QFY17

With a sharp cut in earnings SOTP Valuation

in FY17/FY18/19E, our TP has Valuation methodology Multiple Per share
been revised to Rs 515 Standalone EV / EBIDTA on Dec 18E 8.0 108
JLR EV / EBIDTA on Dec 18E 4.0 378
China JV EV / EBIDTA on Dec 18E 4.0 43
Other Subsidiaries P/E, PBV on Dec 18E 28
Less: Net Automotive Debt (42)
Target Price 516
Source: HDFC sec Inst Research
Our earnings cut has been
largely driven by lower JLR
Change In Estimates
volumes, fx hedging losses
New Old % chg
and continued weakness in In Rs bn
FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E
the domestic market
JLR Volume(Units) 532,254 586,413 654,566 617,996 692,310 765,700 (13.9) (15.3) (14.5)
Standalone Volume(Units) 540,462 601,590 677,111 563,398 640,887 682,426 (4.1) (6.1) (0.8)
Net Sales 2,728 3,137 3,545 2,999 3,333 3,699 (9.0) (5.9) (4.2)
EBITDA 347 469 540 395 478 572 (12.1) (1.9) (5.7)
Adj PAT 117 168 184 138 194 194 (15.4) (13.6) (5.0)
Adj EPS 34.5 49.3 54.2 40.7 57.1 57.1 (15.4) (13.6) (5.0)
Source: HDFC sec Inst Research

Page | 7
 TATA MOTORS : RESULT REVIEW 3QFY17

JLR Model Mix Weak Again JLR: China Mix Fell Sharply QoQ
Jaguar Land Rover Share of RR+RRS % - RHS UK NA China Europe ROW
100 17
100.0% 40.0% 17 16 17 23
20 19 21 21
35.0% 80
With an increase in share of 80.0% 30
30.0% 21 21 29 18 27 29
recently-launched models 60
27 30
25.0%
including XE/Discovery Sport, 60.0% 15 13
11 11
12
20.0% 28 14 11 3
the share of highly profitable 40
40.0% 15.0% 20 23 21 25 21
models (RR + RRS) witnessed 20 22 25
10.0% 20 17
a decline 20.0% 26
5.0% 25 19 25 19 24 19 23
14
0.0% 0.0% -
The management expects

3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17
3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17
both RR/RRS to clock decent
volume growth in FY17
Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

TTMTs MHCV Market Share Declined TTMTs PV Market Share Improved Sequentially
Volumes (in '000) M/S - RHS Volumes (in '000) M/S - RHS
China volumes were lower 60 60.0% 50 7.0%
QoQ 50
45
55.0% 40 6.5%

40 35 6.0%
50.0% 30
30 25 5.5%
45.0% 20
20
TTMTs MHCV market share 15 5.0%
was stable 10 40.0% 10 4.5%
5
0 35.0% 0 4.0%
3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17

3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

2QFY17

3QFY17
Source: SIAM, HDFC sec Inst Research Source: SIAM, HDFC sec Inst Research

Page | 8
 TATA MOTORS : RESULT REVIEW 3QFY17

Peer Valuations
Mcap CMP Adj EPS (Rs/sh) P/E (x) EV/EBITDA (x) RoE (%)
Reco TP
(Rs bn) (Rs/sh) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
Maruti Suzuki 1,770 5,860 BUY 6,428 188.8 242.3 312.2 31.0 24.2 18.8 16.7 14.0 10.4 24.2 22.7 24.8
Tata Motors 1,484 437 BUY 516 34.5 49.3 54.2 12.7 8.9 8.1 6.9 4.8 3.0 13.6 16.9 15.9
Bajaj Auto 807 2,790 BUY 3,400 135.2 159.8 176.2 20.6 17.5 15.8 14.9 11.9 10.4 30.0 31.5 30.0
M&M 768 1,300 BUY 1,450 57.8 75.8 86.4 22.5 17.1 15.0 12.6 10.7 8.4 14.7 17.5 17.6
Eicher Motors 671 24,740 BUY 28,603 624.3 804.9 1,010.0 39.6 30.7 24.5 29.3 23.0 18.4 36.4 34.2 33.9
Hero Motocorp 619 3,098 BUY 3,704 162.2 187.4 213.2 19.1 16.5 14.5 12.5 10.6 9.0 37.4 37.5 37.7
Ashok Leyland 268 94 BUY 100 3.9 5.3 6.9 24.2 17.6 13.7 13.2 10.3 8.5 19.1 23.4 26.5
Force Motors 54 4,098 BUY 4,952 136.5 193.3 256.6 30.0 21.2 16.0 18.9 12.5 9.4 10.7 14.4 16.6
SML Isuzu 17 1,184 BUY 1,536 45.6 61.2 82.0 25.9 19.4 14.4 15.4 12.0 9.1 19.1 21.1 23.9
Atul Auto 9 419 BUY 507 19.2 26.2 31.1 21.9 16.0 13.5 13.3 9.3 7.7 23.1 28.5 27.7
Source: Company, HDFC sec Inst Research*Tata Motors EV/EBITDA based on EV less net auto debt and adjusted EBITDA (normalised R&D spends in line with luxury car makers)

Page | 9
 TATA MOTORS : RESULT REVIEW 3QFY17

Income Statement : Consolidated Balance Sheet : Consolidated

(Rs bn) FY15 FY16 FY17E FY18E FY19E (Rs bn) FY15 FY16 FY17E FY18E FY19E
Net Revenues 2,628 2,756 2,728 3,137 3,545 SOURCES OF FUNDS
Growth (%) 12.9 4.9 (1.0) 15.0 13.0 Share Capital Equity 6 7 7 7 7
Material Expenses 1,599 1,624 1,618 1,829 2,081 Reserves 556 801 908 1,064 1,236
Employee Expenses 255 292 295 329 362 Total Shareholders Funds 563 808 915 1,071 1,243
Product Development Expenses 29 35 37 39 31 Minority Interest 4 9 10 10 12
Other Operating Expenses 349 431 431 471 532 Long-term Debt 736 705 735 752 722
EBITDA 395 374 347 469 540 Short-term Debt - - - - -
EBITDA Margin (%) 15.0 13.6 12.7 15.0 15.2 Total Debt 736 705 735 752 722
EBITDA Growth (%) 13.5 (5.4) (7.1) 35.1 15.1 Net Deferred Taxes (14) 4 7 12 20
Depreciation 134 170 182 204 241 Long-term Provisions & Others 212 205 219 229 245
EBIT 262 204 165 265 299 TOTAL SOURCES OF FUNDS 1,501 1,731 1,886 2,074 2,242
Other Income (Including EO APPLICATION OF FUNDS
9 10 9 10 11
Items) Net Block 838 1,003 1,193 1,358 1,455
Interest 49 46 39 41 43 CWIP 289 285 284 288 292
PBT 222 167 136 234 267 Goodwill 47 48 48 48 48
Tax (Incl Deferred) 76 29 28 82 101 Investments 12 13 13 13 13
Minority Interest (1) (1) (1) (1) (2) LT Loans & Advances 293 331 365 395 458
Profit in respect of investments Total Non-current Assets 1,479 1,681 1,902 2,103 2,266
0 0 10 16 20
in Associate Companies
Inventories 293 334 379 424 496
RPAT 146 140 98 137 147
Debtors 126 130 149 166 235
EO (Loss) / Profit (Net Of Tax) (5) (28) - - -
Cash & Equivalents 462 521 413 399 385
APAT 145 138 117 168 184
Total Current Assets 881 985 942 989 1,115
APAT Growth (%) (3.3) (4.8) (15.1) 43.1 10.0
Creditors 858 935 958 1,018 1,140
Adjusted EPS (Rs) 45.0 40.6 34.5 49.3 54.2
Other Current Liabilities & Provns
EPS Growth (%) (3.3) (9.8) (15.1) 43.1 10.0
Total Current Liabilities 858 935 958 1,018 1,140
Source: Company, HDFC sec Inst Research
Net Current Assets 22 50 (16) (29) (25)
TOTAL APPLICATION OF FUNDS 1,501 1,731 1,886 2,074 2,242
Source: Company, HDFC sec Inst Research

Page | 10
 TATA MOTORS : RESULT REVIEW 3QFY17

Cash Flow: Consolidated Key Ratios: Consolidated

(Rs bn) FY15 FY16 FY17E FY18E FY19E FY15 FY16 FY17E FY18E FY19E
Reported PBT 222 167 136 234 267 PROFITABILITY (%)
Non-operating & EO items (5) (28) - - - GPM 39.1 41.1 40.7 41.7 41.3
Interest expenses 49 46 39 41 43 EBITDA Margin 15.0 13.6 12.7 15.0 15.2
APAT Margin 5.5 5.0 4.3 5.3 5.2
Depreciation 134 170 182 204 241
RoE 23.8 20.1 13.6 16.9 15.9
Working Capital Change 187 (14) (60) (22) (66) RoIC (or Core RoCE) 17.0 14.9 9.5 11.0 10.7
Tax Paid (76) (29) (28) (82) (101) RoCE 13.6 12.4 9.3 11.2 11.2
OPERATING CASH FLOW ( a ) 510 313 268 375 384 EFFICIENCY
Capex (281) (333) (370) (374) (342) Tax Rate (%) 34.4 17.2 20.9 35.0 37.9
Free Cash Flow (FCF) 230 (20) (102) 1 42 Fixed Asset Turnover (x) 1.7 1.4 1.2 1.2 1.2
Investments 1 0 - - - Inventory (days) 40.7 44.2 50.7 49.3 51.1
Non-operating Income (7) 22 13 21 28 Debtors (days) 17.5 17.2 20.0 19.3 24.2
INVESTING CASH FLOW ( b ) (286) (311) (357) (353) (314) Payables (days) 119.2 123.8 128.2 118.4 117.4
Cash Conversion Cycle (days) (61.1) (62.4) (57.5) (49.8) (42.2)
Debt Issuance/(Repaid) 130 (31) 30 17 (30)
Debt/EBITDA (x) 1.9 1.9 2.1 1.6 1.3
Interest Expenses (49) (46) (39) (41) (43) Net D/E (x) 0.2 0.0 0.2 0.1 0.1
FCFE 311 (98) (111) (23) (31) Interest Coverage (x) 5.4 4.4 4.3 6.5 7.0
Share Capital Issuance (233) 136 - - - PER SHARE DATA (Rs)
Dividend - (1) (10) (12) (12) EPS 45.0 40.6 34.5 49.3 54.2
FINANCING CASH FLOW ( c ) (152) 57 (19) (36) (85) CEPS 78.8 75.0 80.0 100.4 114.6
NET CASH FLOW (a+b+c) 72 59 (107) (14) (14) Dividend - 0.2 2.5 3.0 3.0
EO Items, Others (3) - - - - Book Value 174.8 237.9 269.4 315.3 366.0
Closing Cash & Equivalents 462 521 413 399 385 VALUATION
P/E (x) 9.7 10.8 12.7 8.9 8.1
Source: Company, HDFC sec Inst Research
P/BV (x) 2.5 1.8 1.6 1.4 1.2
EV/EBITDA (x) 4.7 5.0 6.2 4.3 3.2
EV/Revenues (x) 0.6 0.5 0.6 0.5 0.5
OCF/EV (%) 33.7 20.7 16.5 22.9 23.9
FCF/EV (%) 15.2 (1.3) (6.3) 0.0 2.6
FCFE/Mkt Cap (%) 22.1 (6.6) (7.5) (1.6) (2.1)
Dividend Yield (%) - 0.0 0.6 0.7 0.7
Source: Company, HDFC sec Inst Research * EV/EBITDA based on EV less net auto debt and
adjusted EBITDA (normalised R&D spends in line with luxury car makers).

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 TATA MOTORS : RESULT REVIEW 3QFY17

RECOMMENDATION HISTORY
Date CMP Reco Target
Tata Motors TP 12-Feb-16 276 BUY 434
700
12-May-16 380 BUY 479
600 31-May-16 421 BUY 524
29-Aug-16 504 BUY 533
500 2-Sep-16 544 BUY 625
16-Nov-16 457 BUY 603
400 5-Dec-16 433 BUY 573
16-Feb-17 436 BUY 516
300

200 Rating Definitions

Dec-16
Oct-16
Aug-16
Apr-16

Nov-16

Jan-17
Feb-16

Sep-16

Feb-17
May-16

Jun-16

Jul-16
Mar-16

BUY: Where the stock is expected to deliver more than 10% returns over the next 12 month period
NEUTRAL: Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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 TATA MOTORS : RESULT REVIEW 3QFY17

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