November 29, 2022

We consider Tata is within the early part of a multi-year turnaround led by confluence of improved technique and cyclical restoration. Indian truck and PV demand is recovering from the worst slowdown in a long time, and Tata is gaining share. JLR is bettering sequentially as chip shortages ease, and ramp-up of next-gen RR/RR-Sport ought to present a lift. An early lead in India EVs presents massive choice worth. Tata is our high auto choose; India enterprise varieties 67% of our Rs 625 PT.

PV market share at 9-year-high; #2 in SUVs in 3Q: Tata’s passenger automobile (PV) market share has risen from 5% in FY20 to 12% in 9MFY22, a 9-year-high, led by concentrate on SUVs, improved product styling and higher model positioning. It was #2 participant in SUVs in 3Q with 18% share. Its new sub-compact SUV, Punch, holds sturdy potential because it brings SUVs to a cheaper price vary. Tata is now launching CNG gas variants, which may additional carry market share amid rising attractiveness of CNG automobiles. Indian PV demand is recovering too, and we anticipate sturdy 19% business CAGR over FY22-24.

Higher positioned for subsequent truck cycle: Tata misplaced 11ppt market share in vehicles over FY12-18 as AL expanded its portfolio and vendor community whereas having fun with tax advantages at its Pantnagar plant. Tata reworked its technique beneath a brand new CV enterprise head beginning 2017, specializing in gross sales engagement, vendor profitability and servicing. AL’s Pantnagar tax advantages, conversely, resulted in March 2020. AL additionally had cheaper expertise for BS4 emission norms, however this benefit has seemingly pale with the brand new BS6 norms from April 2020. Tata’s truck share has risen to 55% in 9MFY22, a 6-year-high. Truck demand is bettering from a extreme downturn, and we anticipate 22% business CAGR over FY22-24 with Tata higher positioned on this cycle.

Aggressive plans for India EVs: India continues to be in nascent levels of PV electrification with EVs forming simply ~1% of the market. Tata has taken an early lead although with EVs contributing 6% of its India PV volumes. It intends to increase its portfolio from 2 EVs presently to 10 by FY26, and the latest funding by TPG offers it the steadiness sheet power to drive electrification.
Time to Purchase: We consider Tata is in early part of a multi-year turnaround. By FY24, we see EBITDA rising 96% from FY21, EPS exceeding previous peak, and internet auto debt falling 81% from FY21. We lower FY22E EBITDA by 9% on decrease JLR volumes however keep FY23-24 estimates; we retain Purchase with 625 PT. On FY24 foundation, we see worth of700. The India enterprise was a drag final decade, however now varieties 67% of our PT.

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