RESULTS REVIEW 1QFY18 10 AUG 2017

Tata Motors BUY

HDFC securities Institutional Research is also available on Bloomberg HSLB & Thomson Reuters

Temporary glitches Tata Motors’ (TTMT) 1QFY18 performance was a miss on account of lower JLR margins (7.9%), led by lower volumes, higher costs associated with launches and rise in staff costs. Standalone margins also were below estimates, owing to an inferior product mix and GST transition-related costs.

Management guided that hedging losses could reduce in subsequent quarters. Also, the model mix is likely to turn favourable with the ramp-up of sales for Discovery and Velar, thereby improving margins. Post commissioning of the Slovakia plant, capex intensity for JLR is likely to reduce from FY19. This, coupled with an improvement in operating performance, would improve free cash flows in FY18E and FY19E.

With Tiago and Tigor’s favourable start and new launches scheduled over FY18E, we believe the worst is over for the PV business.

We cut our FY18/FY19 estimates and introduce FY20 estimates. We maintain BUY with a revised SOTP-based TP of Rs 516.

Highlights of the quarter Domestic business recovery underway: TTMT is

undertaking various initiatives to increase market share in the PV and CV segments. To address the product gaps in its PV portfolio, it will launch Nexon UV by Sept-18. Reduction in the number of suppliers and in time to market, improvement in service quality and expansion of touch points are the steps being undertaken to increase market share in both segments by 5% over the next two years.

JLR: Rich product mix and lower forex losses to benefit: Management guided that margins would benefit from the positive impact of new model launches and lower cost structure (higher mix of new models). Higher realised hedge losses along with high advertising expenditure will add to the burden. Over the medium-term, management is guiding for 8-10% EBIT margin (implying EBITDA margin of 14-16%) for the medium term.

Near-term outlook: We expect 2Q JLR volumes to be strong, driven by the launch of the new Discovery and RR Velar.

Consolidated Financial Summary (Rs bn) 1QFY18 1QFY17 YoY (%) 4QFY17 QoQ (%) FY16 FY17 FY18E FY19E FY20E Net Sales 585 659 (11.2) 772 (24.2) 2,730 2,697 3,021 3,413 3,857 EBITDA 58 85 (31.9) 118 (51.0) 383 335 361 447 516 APAT 32 18 80.8 43 (26.2) 150 102 92 152 179 Diluted EPS (Rs) 9.4 5.2 80.8 12.8 (26.2) 44.3 30.2 27.1 44.8 52.8 P/E (x) 8.6 12.6 14.1 8.5 7.2 EV / EBITDA (x)* 4.3 6.0 5.5 3.8 3.0 RoE (%) 22.0 12.2 10.1 14.9 15.2 Source: Company, HDFC sec Inst Research. * EV/EBITDA on adjusted basis – please refer page to page 11 for details

INDUSTRY AUTOS

CMP (as on 10 Aug 2017) Rs 381

Target Price Rs 516 Nifty 9,820

Sensex 31,531

KEY STOCK DATA

Bloomberg TTMT IN

No. of Shares (mn) 3,396

MCap (Rs bn) / ($mn) 1,291/19,905

6m avg traded value (Rs mn) 3,460

STOCK PERFORMANCE (%)

52 Week high / low Rs 599 / 375

3M 6M 12M

Absolute (%) (12.1) (25.4) (24.5)

Relative (%) (16.3) (36.7) (38.0)

SHAREHOLDING PATTERN (%)

Promoters 34.73

FIs & Local MFs 16.10

FPIs 23.49

Public & Others 25.68 Source : BSE Sneha Prashant sneha.prashant@hdfcsec.com +91-22-6171-7336

Abhishek Jain abhishekkumar.jain@hdfcsec.com +91-22-6171-7320

TATA MOTORS: RESULT REVIEW 1QFY18

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Quarterly Financials Snapshot (Consolidated) Particulars 1QFY18 1QFY17 YoY (%) 4QFY17 QoQ (%) Net Sales 584,934 658,949 (11.2) 772,172 (24.2) Material Expenses 365,758 390,908 (6.4) 475,152 (23.0) Employee Expenses 71,152 74,664 (4.7) 70,274 1.3 Other Operating Expenses 90,251 108,537 (16.8) 108,871 (17.1) EBITDA 57,773 84,840 (31.9) 117,875 (51.0) Depreciation 45,246 45,508 (0.6) 46,702 (3.1) EBIT 12,527 39,332 (68.2) 71,173 (82.4) Other Income 1,541 1,736 (11.2) 2,342 (34.2) Interest Cost 11,089 11,694 (5.2) 11,640 (4.7) Product Development Cost 8,124 8,711 (6.7) 9,864 (17.6) Forex gain/(loss) (6,313) 54 (11,768.4) (452) 1,296.9 PBT 1,168 20,608 (94.3) 52,463 (97.8) Tax 12,074 7,200 67.7 12,396 (2.6) RPAT (10,907) 13,408 (181.3) 40,067 (127.2) Share of profits in associates/JVs 6,704 4,290 56.3 4,106 63.3 EO Items (Adj For Tax) (36,202) - - 808 (4,579.9) APAT 31,999 17,698 80.8 43,364 (26.2) Adj EPS 9.4 5.2 80.8 12.8 (26.2) Source: Company, HDFC sec Inst Research Margin Analysis (Consolidated) 1QFY18 1QFY17 YoY (bps) 4QFY17 QoQ (bps) Material Expenses As % Of Net Sales 62.5 59.3 321 61.5 100 Employee Expenses As % Of Net Sales 12.2 11.3 83 9.1 306 Other Expenses As % Of Net Sales 15.4 16.5 (104) 14.1 133 EBITDA Margin (%) 9.9 12.9 (300) 15.3 (539) Tax Rate (%) 1,033.9 34.9 99,892 23.6 101,023 Net Profit Margin (%) 5.5 2.7 278 5.6 (15) Source: Company, HDFC sec Inst Research

Consolidated topline was below expectations, led by weak operations at both divisions - domestic and JLR EBIDTA margin declined to 9.9%, led by 320bps YoY and 100bps QoQ drop in gross margins One-time gain of Rs 36bn was recorded towards changes made in JLR’s pension plan Excluding for this one-off, company reported net loss of Rs 10.5bn

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Quarterly Financials Snapshot (Standalone) (Rs mn) 1QFY18 1QFY17 YoY (%) 4QFY17 QoQ (%) CV (Domestic, in units) 60,446 78,328 (22.8) 91,459 (33.9) PV (Domestic, in units) 34,858 31,966 9.0 43,962 (20.7) Exports (in units) 9,529 13,816 (31.0) 15,647 (39.1) Total volumes (in units) 104,833 124,110 (15.5) 151,068 (30.6) Net Sales 90,943 103,196 (11.9) 135,867 (33.1) Material Expenses 64,202 68,865 (6.8) 95,608 (32.8) Employee Expenses 8,886 8,983 (1.1) 9,325 (4.7) Other Operating Expenses 17,745 18,443 (3.8) 22,818 (22.2) EBITDA 111 6,905 (98.4) 8,115 (98.6) Depreciation 6,748 7,122 (5.3) 8,096 (16.7) EBIT (6,637) (218) 2,945.9 19 (35,783.3) Other Income 6,399 6,246 2.5 1,143 459.8 Interest Cost 3,678 3,401 8.2 4,545 (19.1) Product Development Cost 752 1,162 (35.2) 1,915 (60.7) PBT (4,669) 1,465 (418.6) (5,298) (11.9) Tax 2 121 (98.3) 109 (98.2) RPAT (4,671) 1,344 (447.5) (5,407) (13.6) EO Items (Adj For Tax) - 1,087 (100.0) 2,883 (100.0) APAT (4,671) 258 (1,913.8) (8,290) (43.7) Adj EPS (1.5) 0.4 (447.5) (1.7) (13.6) Source: Company, HDFC sec Inst Research Margin Analysis (Standalone) 1QFY18 1QFY17 YoY (bps) 4QFY17 QoQ (bps) Material Expenses % Net Sales 70.6 66.7 386 70.4 23 Employee Expenses % Net Sales 9.8 8.7 107 6.9 291 Other Operating Expenses % Net Sales 19.5 17.9 31.9 16.8 272 EBITDA Margin (%) 0.1 6.7 (657) 6.0 (585) Tax Rate (%) (0.0) 8.3 (831) (2.1) 202 APAT Margin (%) (5.1) 0.2 (539) (6.1) 97 Source: Company, HDFC sec Inst Research

Pre-buying in 4QFY17, delay in production, GST transition pain impact and higher competition led to lower CV volumes Realisation improved by 4% YoY to Rs 867k/unit despite GST-related discounts and weaker mix with lower MHCV volume (success of Tiago, Tigor and Hexa provided some cushion) Negative operating leverage took a hit on profitability with EBIDTA margin at 0%, down 650bps YoY Lower interest and depreciation restricted net loss at Rs 4.7bn Management has indicated 6 new product launches in its M&HCV portfolio, while it expects a ramp-up in Tiago, Tigor and Hexa, along with the soon-to-be-launched Nexon, to drive its PV segment over FY18

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Quarterly Financials Snapshot (JLR - IFRS) In GBP mn 1QFY18 1QFY17 YoY (%) 4QFY17 QoQ (%) Retail Volumes (‘000 units) 735.8 132.7 454.3 149.3 392.9 Wholesale Volumes –Ex-CJLR (‘000 units) 117.9 120.8 (2.4) 130.9 (9.9) Revenue 5,599 5,355 4.6 6,537 (14.3) Material Expenses 3,565 3,241 10.0 3,869 (7.9) Employee Expenses 656 605 8.4 648 1.2 Other Operating Expenses 1,291 1,159 11.4 1,788 (27.8) Product Development Expense (355) (322) 10.2 (379) (6.3) EBITDA 442 672 (34.2) 611 (27.7) Interest Cost 12 12 - 5 140.0 Depreciation 450 388 16.0 409 10.0 Debt/Unrealised MTM Loss/(Gain) (100) (31) 222.6 (62) 61.3 Share Of Profit/(Loss) From JV 77 45 71.1 35 120.0 PBT 157 348 (54.9) 294 (46.6) Exceptional Item 438 51 758.8 85 415.3 Tax 123 95 29.5 88 39.8 RPAT 34 253 (86.6) 206 (83.5) APAT 472 304 55.3 291 62.2 Source: Company, HDFC sec Inst Research Margin Analysis (JLR – IFRS)

1QFY18 1QFY17 YoY (bps) 4QFY17 QoQ (bps) Material Expenses As % Of Net Sales 63.7 60.5 314.9 59.2 448.6 Employee Expenses As % Of Net Sales 11.7 11.3 41.9 9.9 180.4 Other Expenses As % Of Net Sales 23.1 21.6 141.4 27.4 (429.4) EBITDA Margin (%) 7.9 12.5 (465.5) 9.3 (145.3) Net Profit Margin (%) 0.6 4.7 (411.7) 3.2 (254.4) Tax Rate (%) 78.3 27.3 5,104.5 29.9 4,841.2 Source: Company, HDFC sec Inst Research

Volume declined by 2% YoY as Jaguar volume were impacted by lower XE and XF, while F-pace remained strong Management is hoping for a similar run like F-Pace for the recently-launched RR Velar and to-be-launched Jaguar E-Pace in FY18/19E Chery JV volumes witnessed strong growth of 52% YoY at 20,560 units (+28% QoQ), driven by XFL in China and robust demand for RR Evoque JLR realisation at GBP47.5k, grew 7% YoY mainly driven by a richer mix Margins came in lower at 7.9% (-466bps YoY, -145bps QoQ) led by lower scale, adverse product mix, increase in variable marketing expenses, new model launch costs and rise in employee cost JLR recorded one-time credit of GBP 437mn for changes made in the pension plan in Q1FY18

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JLR: Key Financial Highlights / Model Assumptions in £Mn FY16 FY17 FY18E FY19E FY20E Revenue 22,208 24,339 27,303 31,625 34,838 % growth (YoY) 1.6 9.6 12.2 15.8 10.2 Wholesales volumes (in '000) 544 601 661 738 783 % growth 15.6 10.4 10.1 11.6 6.1 Expenditure Material cost 13,146 15,071 16,873 19,734 21,913 % of sales 59.2 61.9 61.8 62.4 62.9 Employee cost 2,321 2,490 2,921 2,846 2,996 % of sales 10.5 10.2 10.7 9.0 8.6 Other expenses 4,670 5,249 5,734 6,325 5,748 % of sales 21.0 21.6 21.0 20.0 16.5 Addback R&D Cost (1,560) (1,783) (1,900) (1,800) (1,800) % of sales (7.0) (7.3) (7.0) (5.7) (5.2) R&D cost expensed 318 357 380 324 324 Total 18,895 21,384 24,008 27,430 29,182 % of sales 85.1 87.9 87.9 86.7 83.8 EBITDA 3,313.0 2,955.4 3,294.7 4,195.8 5,656.6 % of sales 14.9 12.1 12.1 13.3 16.2 Other Income - - - - - Depreciation and amortization 1,403 1,656 1,834 2,153 2,418 Interest expense 54 35 45 19 9 Forex gain/(loss) (27) 36 - - - Share of profit/(loss) from joint venture 66 159 170 180 225 % of sales 0.3 0.7 0.6 0.6 0.6 PBT 1,895 1,459 1,585 2,204 3,455 % of sales 8.5 6.0 5.8 7.0 9.9 Tax 247 338 344 536 856 Tax rate % 13.0 23.2 21.7 24.3 24.8 APAT 1,649 1,121 1,241 1,667 2,599 % of sales 7.4 4.6 4.5 5.3 7.5 RPAT 1,326 1,272 1,241 1,488 2,374 % of sales 6.0 5.2 4.5 4.7 6.8 Source: Company, HDFC sec Inst Research

We have maintained our FY18/19E volume and EBITDA estimates on lower volumes and FX hedging losses Outlook for JLR volume growth appears healthy with its new product cycle Management expects JLR margin to improve going ahead, on lower hedging losses Model mix is likely to turn favourable with the ramp up of sales for the newly-launched Land Rover products - Discovery and Velar

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Standalone: Key Financial Highlights/ Model Assumptions Rs in Mn FY16 FY17 FY18E FY19E FY20E Vehicle Sales (in units) CV (Domestic) 327,730 330,430 346,852 380,776 420,373 PV (Domestic) 125,945 146,492 190,204 201,576 210,046 Exports 57,991 64,950 62,073 66,168 72,372 Total 511,666 541,872 599,129 648,520 702,791 % YoY (0.3) 5.9 10.6 8.2 8.4 Net Sales 428,455 443,640 483,568 556,103 640,458 % YoY 19.4 3.5 9.0 15.0 15.2 Other Operating Income - - Total Income From Operations 428,455 443,640 333,662 389,272 451,523 Expenditure 69.0 69.3 70.5 RM Cost 291,094 313,489 38,200 41,152 46,753 % Of Sales 67.9 70.7 7.9 7.4 7.3 Employee Cost 31,890 35,585 85,775 92,097 94,419 % Of Sales 7.4 8.0 17.7 16.6 14.7 Other 71,823 77,559 457,637 522,521 592,696 % Of Sales 16.8 17.5 84.6 81.9 84.6 Total Expenses 394,806 426,633 25,931 33,582 47,763 % Of Sales 83.3 86.9 5.4 6.0 7.5 EBITDA 33,648 17,007 17,645 17,877 18,111 EBITDA Margin % 7.9 3.8 5,000 5,600 6,384 Other Income 14,023 9,788 29,960 29,920 31,925 Product Development Expenses 4,183 4,545 12,889 9,966 10,464 Depreciation 23,292 29,694 (4,273) 5,974 17,101 Interest 15,920 15,902 (16,273) 5,974 17,101 PBT (Pre-exceptional Items) 4,276 (23,345) 346,852 380,776 420,373 PBT (Pre-exceptional And JLR Dividend) (10,041) (37,745) 190,204 201,576 210,046 Source: Company, HDFC sec Inst Research

Expect healthy volume growth in the PV segment for TTMT in FY18/19, while the complete revival in CVs is yet to play out

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SOTP Valuation Valuation methodology Multiple Per share Standalone EV / EBIDTA on Jun-19E 8.0 59 JLR EV / EBIDTA on Jun-19E 4.0 460 China JV EV / EBIDTA on Jun-19E 4.0 30 Other Subsidiaries P/E, PBV on Jun-19E 28 Less: Net Automotive Debt (62) Target Price 516 Source: HDFC sec Inst Research Change In Estimates

In Rs bn New Old % Chg

FY18E FY19E FY18E FY19E FY18E FY19E JLR Volume(Units) 661,383 737,800 661,383 737,800 0.0 (0.0) Standalone Volume(Units) 599,129 675,816 599,129 675,816 (0.0) (0.0) Net Sales 3,021 3,413 3,021 3,413 (0.0) 0.0 EBITDA 361 447 390 478 (7.4) (6.5) Adj PAT 92 152 119 170 (22.8) (10.4) Adj EPS 27.1 44.8 34.9 50.2 (22.5) (10.7) Source: HDFC sec Inst Research

Our TP has been revised to Rs 516 on roll forward of earnings to Jun-19E Our margin estimates earnings cut has been largely driven by fx hedge losses and continued weakness in the domestic market

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JLR Model Mix Was Favourable With Higher LR Share JLR: China Mix Improved QoQ

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research TTMT’s MHCV Market Share Declined

TTMT’s PV Market Share Improved Sequentially

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

With an increase in the share of recently-launched models including Discovery and RR Velar, the share of highly profitable models (RR + RRS) witnessed a decline sequentially The management expects both RR/RRS to clock decent volume growth in FY18 China volumes improved QoQ TTMT’s MHCV market share declined sequentially, in a weak demand environment PV market share has been improving on the back of strong demand for Tiago, Tigor and Hexa

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Jaguar Land Rover Share of RR+RRS % - RHS

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Volumes (in '000) M/S - RHS

4.0%4.2%4.4%4.6%4.8%5.0%5.2%5.4%5.6%5.8%6.0%

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Volumes (in '000) M/S - RHS

TATA MOTORS: RESULT REVIEW 1QFY18

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Peer Valuations

Mcap (Rs bn)

CMP (Rs/sh) Reco TP

Adj EPS (Rs/sh) P/E (x) EV/EBITDA (x) RoE (%) FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E

Maruti Suzuki 2,289 7,579 BUY 8,478 242.9 272.4 353.3 31.2 27.8 21.5 22.0 19.0 14.3 23.2 22.4 26.3 Tata Motors 1,291 380 BUY 516 30.2 27.1 44.8 12.6 14.1 8.5 5.2 4.6 3.3 3.8 3.0 4.5 Eicher Motors 819 1,387 BUY 1,556 57.5 65.8 78.0 24.1 21.1 17.8 15.9 13.7 11.4 14.2 14.6 15.6 M&M 816 30,112 BUY 35,809 627.4 870.4 1,071.4 48.0 34.6 28.1 35.6 25.1 20.7 41.4 45.0 44.3 Bajaj Auto 809 2,796 BUY 3,296 132.3 143.2 167.4 21.1 19.5 16.7 15.2 13.2 11.0 25.3 23.4 24.7 Hero Motocorp 777 3,890 BUY 4,250 169.1 182.3 208.6 23.0 21.3 18.6 15.7 14.5 12.6 35.6 33.9 34.9 Ashok Leyland 294 103 BUY 118 4.3 5.0 7.5 24.1 20.6 13.7 26.8 24.1 17.2 6.0 6.3 8.2 Force Motors 50 3,822 BUY 5,186 137.3 154.2 241.2 27.8 24.8 15.8 18.7 16.2 10.6 11.4 11.5 15.8 SML Isuzu 14 959 BUY 1,325 43.4 36.1 66.2 22.1 26.6 14.5 13.1 14.2 8.6 16.9 12.4 20.0 Atul Auto 9 416 BUY 528 17.0 24.5 31.5 24.4 17.0 13.2 14.1 9.9 7.8 22.3 26.9 28.5

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)

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Income Statement : Consolidated (Rs bn) FY16 FY17 FY18E FY19E FY20E Net Revenues 2,730 2,697 3,021 3,413 3,857 Growth (%) 3.9 (1.2) 12.0 13.0 13.0 Material Expenses 1,634 1,659 1,855 2,065 2,403 Employee Expenses 289 283 317 358 366 Product Development Expenses 35 34 35 31 31 Other Operating Expenses 390 386 453 512 540 EBITDA 383 335 361 447 516 EBITDA Margin (%) 14.0 12.4 12.0 13.1 13.4 EBITDA Growth (%) (3.1) (12.6) 7.8 23.8 15.5 Depreciation 167 179 206 202 222 EBIT 216 156 155 245 294 Other Income (Including EO Items) 9 8 8 9 8

Interest 49 42 45 45 43 PBT 176 121 118 209 259 Tax (Incl Deferred) 30 33 39 69 77 Minority Interest (1) (1) (1) (2) (3) Profit in respect of investments in Associate Companies 6 15 14 14 (0)

RPAT 141 75 66 128 185 EO (Loss) / Profit (Net Of Tax) (35) (28) - - - APAT 150 102 92 152 179 APAT Growth (%) 3.9 (31.9) (10.4) 65.8 17.8 Adjusted EPS (Rs) 44.3 30.2 27.1 44.8 52.8 EPS Growth (%) (1.5) (31.9) (10.4) 65.8 17.8

Source: Company, HDFC sec Inst Research

Balance Sheet : Consolidated (Rs bn) FY16 FY17 FY18E FY19E FY20E SOURCES OF FUNDS Share Capital - Equity 7 7 7 7 7 Reserves 801 866 946 1,086 1,254 Total Shareholders’ Funds 808 873 953 1,093 1,261 Minority Interest 9 10 11 13 15 Long-term Debt 705 735 712 682 692 Short-term Debt - - - - - Total Debt 705 735 712 682 692 Net Deferred Taxes 4 8 12 16 22 Long-term Provisions & Others 205 220 219 227 233 TOTAL SOURCES OF FUNDS 1,731 1,845 1,906 2,030 2,222 APPLICATION OF FUNDS Net Block 1,006 1,201 1,309 1,393 1,463 CWIP 285 284 288 292 297 Goodwill 48 48 48 48 48 Investments 13 13 13 13 13 LT Loans & Advances 331 365 350 406 431 Total Non-current Assets 1,684 1,910 2,008 2,153 2,252 Inventories 334 381 369 394 430 Debtors 130 150 145 184 201 Cash & Equivalents 518 363 237 253 362 Total Current Assets 982 894 751 832 993 Creditors 935 960 853 955 1,023 Other Current Liabilities & Provns Total Current Liabilities 935 960 853 955 1,023 Net Current Assets 47 (66) (102) (123) (30) TOTAL APPLICATION OF FUNDS 1,731 1,845 1,906 2,030 2,222

Source: Company, HDFC sec Inst Research

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Cash Flow: Consolidated (Rs bn) FY16 FY17 FY18E FY19E FY20E Reported PBT 176 121 118 209 259 Non-operating & EO items (35) (28) - - - Interest expenses 49 42 45 45 43 Depreciation 167 179 206 202 222 Working Capital Change (14) (61) (76) (11) (4) Tax Paid (30) (33) (39) (69) (77) OPERATING CASH FLOW ( a ) 313 221 254 376 444 Capex (333) (372) (318) (291) (296) Free Cash Flow (FCF) (21) (151) (64) 85 148 Investments 0 - - - - Non-operating Income 28 18 17 18 6 INVESTING CASH FLOW ( b ) (306) (354) (301) (272) (290) Debt Issuance/(Repaid) (31) 30 (23) (30) 10 Interest Expenses (49) (42) (45) (45) (43) FCFE (101) (163) (132) 10 114 Share Capital Issuance 130 - - - - Dividend (1) (10) (12) (12) (12) FINANCING CASH FLOW ( c ) 49 (22) (80) (87) (45) NET CASH FLOW (a+b+c) 56 (155) (126) 16 109 EO Items, Others - - - - - Closing Cash & Equivalents 518 363 237 253 362

Source: Company, HDFC sec Inst Research

Key Ratios: Consolidated FY16 FY17 FY18E FY19E FY20E PROFITABILITY (%) GPM 40.2 38.5 38.6 39.5 37.7 EBITDA Margin 14.0 12.4 12.0 13.1 13.4 APAT Margin 5.5 3.8 3.0 4.5 4.7 RoE 22.0 12.2 10.1 14.9 15.2 RoIC (or Core RoCE) 18.5 9.7 7.4 10.8 13.0 RoCE 13.5 8.5 7.5 10.6 11.3 EFFICIENCY Tax Rate (%) 17.2 26.8 33.0 33.0 29.7 Fixed Asset Turnover (x) 1.4 1.2 1.2 1.2 1.2 Inventory (days) 44.6 51.5 44.6 42.2 40.7 Debtors (days) 17.4 20.3 17.5 19.7 19.0 Payables (days) 125.0 129.9 103.1 102.1 96.8 Cash Conversion Cycle (days) (62.9) (58.1) (41.0) (40.2) (37.1) Debt/EBITDA (x) 1.8 2.2 2.0 1.5 1.3 Net D/E (x) 0.0 0.2 0.3 0.2 0.1 Interest Coverage (x) 4.4 3.7 3.5 5.4 6.8 PER SHARE DATA (Rs) EPS 44.3 30.2 27.1 44.8 52.8 CEPS 75.9 66.8 78.6 95.4 108.4 Dividend 0.2 2.5 3.0 3.0 3.0 Book Value 237.9 256.9 280.5 321.8 371.2 VALUATION P/E (x) 8.6 12.6 14.1 8.5 7.2 P/BV (x) 1.6 1.5 1.4 1.2 1.0 EV/EBITDA (x) 4.3 6.0 5.5 3.8 3.0 EV/Revenues (x) 0.5 0.6 0.5 0.4 0.4 OCF/EV (%) 23.6 14.9 16.2 25.0 31.9 FCF/EV (%) (1.6) (10.1) (4.1) 5.6 10.6 FCFE/Mkt Cap (%) (7.8) (12.6) (10.2) 0.8 8.8 Dividend Yield (%) 0.1 0.7 0.8 0.8 0.8

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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RECOMMENDATION HISTORY

Date CMP Reco Target 29-Aug-16 504 BUY 533 2-Sep-16 544 BUY 625

16-Nov-16 457 BUY 603 5-Dec-16 433 BUY 573

16-Feb-17 436 BUY 529 13-Apr-17 465 BUY 516 24-May-17 470 BUY 542 10-Aug-17 381 BUY 516

Rating Definitions 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

200

300

400

500

600

700

Aug-

16

Sep-

16

Oct

-16

Nov-

16

Dec-

16

Jan-

17

Feb-

17

Mar

-17

Apr-

17

May

-17

Jun-

17

Jul-1

7

Aug-

17

Tata Motors TP

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TATA MOTORS: RESULT REVIEW 1QFY18

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