Axis Securities on Tata Motors
CV volume/ pricing outlook: Management indicated infra push and recovery in economy shall drive MHCV volumes for FY18 and beyond. Its SCR technology has been well accepted and should drive market share gains.
We shift focus to volume growth given a strong model cycle – Velar ramp-up, mid-cycle refresh RR/RR Sport (with plug in hybrid variants), and E-Pace over next 12-15 months.
Hedging losses: Based on its hedge book, there is an additional GBP 1.1 bn worth of realized losses in the balance sheet (assuming currency stays where it is), of which GBP 800 mn would be realized over the next 12 months. The management expects hedging losses to start coming down from Q4FY18.
Target EBIT margin: The company plans to maintain EBIT margin in the range of 8-10% (5% this quarter), as positive operating leverage and lower realized forex losses improve the margin.
We maintain a BUY with a target of Rs 443.