Notwithstanding the current woes for Tata Motors in China, Societe Generale seems to have a real bullish view about the homegrown auto company. The firm sees an upside of over 80 per cent for the stock from current levels and has assigned a target price of Rs 616 for the stock.
“We are increasing our NPV-based target price to Rs 616 from Rs 575 to reflect higher earnings forecasts. We use a nominal weighted average cost of capital of 12 per cent and model cash flows until 2025 with six per cent terminal growth. Our downside risks to the target include weaker than expected success of new model launches, worse than expected global economic slowdown,” Societe Generale said in a recent note on Tata Motors.
According to Societe Generale, Jaguar volumes are likely to triple and Land Rover’s performance is better than it appears.“We expect Jaguar shipments to all but triple over the next two years. After the launch of the Jaguar XE, Jaguar increased its market share in UK/Europe premium vehicles market from 0.86 per cent in July 2014 to 1.49 per cent in July 2015 despite the negative headwinds of the phase-out of the current Jaguar XF and XJ models,” Societe Generale said.
“As the Jaguar XE is rolled out beyond the UK and Europe, we expect to see a significant increase in Jaguar sales volumes,” it added.
Land Rover shipments were up 1.4 per cent in June 2015 and down 6.5 per cent (YoY) in July 2015, respectively. However, this ‘anaemic’ performance was a result of several one-off issues, including problems with the Evoque for the China joint venture, the limited geographic distribution of the Discovery Sport with the Ingenium engine, and issues with the supply of Range Rover and Range Rover Sport seats.
Despite all this, Land Rover managed to increase its market share in UK/Europe from 3.94 per cent in June 2014 to 4.65 per cent in June 2015. We think that as Land Rover launches the Evoque facelift (September 2015) and Discovery Sport with Ingenium engine worldwide (over the next six months), the market share gains seen in Europe will be replicated worldwide, Societe Generale added in the note.
“We are increasing our NPV-based target price to Rs 616 from Rs 575 to reflect higher earnings forecasts. We use a nominal weighted average cost of capital of 12 per cent and model cash flows until 2025 with six per cent terminal growth. Our downside risks to the target include weaker than expected success of new model launches, worse than expected global economic slowdown,” Societe Generale said in a recent note on Tata Motors.
According to Societe Generale, Jaguar volumes are likely to triple and Land Rover’s performance is better than it appears.“We expect Jaguar shipments to all but triple over the next two years. After the launch of the Jaguar XE, Jaguar increased its market share in UK/Europe premium vehicles market from 0.86 per cent in July 2014 to 1.49 per cent in July 2015 despite the negative headwinds of the phase-out of the current Jaguar XF and XJ models,” Societe Generale said.
“As the Jaguar XE is rolled out beyond the UK and Europe, we expect to see a significant increase in Jaguar sales volumes,” it added.
Land Rover shipments were up 1.4 per cent in June 2015 and down 6.5 per cent (YoY) in July 2015, respectively. However, this ‘anaemic’ performance was a result of several one-off issues, including problems with the Evoque for the China joint venture, the limited geographic distribution of the Discovery Sport with the Ingenium engine, and issues with the supply of Range Rover and Range Rover Sport seats.
Despite all this, Land Rover managed to increase its market share in UK/Europe from 3.94 per cent in June 2014 to 4.65 per cent in June 2015. We think that as Land Rover launches the Evoque facelift (September 2015) and Discovery Sport with Ingenium engine worldwide (over the next six months), the market share gains seen in Europe will be replicated worldwide, Societe Generale added in the note.
