fundamental analysis of tata motors 10 september 2008
DESCRIPTION
fundamental analysis of Tata Motors 10 september 2008TRANSCRIPT
Equity Valuation ofTATA Motors
Presented by:Amit MukherjeeRitu Singh TomarRichi ShrivastavaKeshri. N. TripathiKanhaiya Gupta
Agenda
Fundamental Analysis• Introduction to TATA
Motors• Global Overview• Domestic Overview• Company Analysis• Current financials• Past performance• Future plans
Equity valuation• Estimated future growth
(calculation of ‘g’)• Expected return on equity
(CAPM Analysis ‘k’ )• Calculation FCFE• Intrinsic Value• Conclusion
TATA Motors Ltd
Founded: 1945Founder: JRD TataHeadquarters :Mumbai,
IndiaKey people: Ratan Tata,
ChairmanParent: Tata GroupSubsidiaries: Jaguar Cars
Land Rover
Products: Automobiles and Engines
Revenue : USD 9.07 ▲billion (2006)
Net income: USD $474.0 ▲million (2006)
• Tata Daewoo Website: http://www.tatamotors.com/
• Tata Motors Limited is India's largest automobile company, with revenues of Rs. 32,426 crores (USD 7.2 billion) in 2006-07.
• It is the leader by commercial vehicles in each segment.
• The company is the world's fifth M&HCV manufacturer, and the world's second largest medium and heavy bus manufacturer.
• Annual turnover of over Rs 108 billion.
• The company has manufacturing plants at Jamshedpur, Pune and Lucknow, Bangalore, Chennai, Noida, Uttaranchal & Singur, & have many more manufacturing & R&D units abroad.
TATA Motors At-a-Glance
Global Automobile Industry
Asian Automobile market Growth rate
Growth potential at Global Level • India is on every major
global automobile player's roadmap.
See why?• 4th largest commercial
vehicle market in the world.
• 11th largest passenger car market in the world.
• expected to become the 7th largest by 2016.
Growth Potential at Domestic level
• Sales of passenger cars in India is likely to grow at an average of 14.9% each year to touch the 2.1 million mark by 2010!
• Increase in automobile Purchase Trend• Growing working population• Increased access to credit and lower interest loans• Increased consumer embrace of financial products• Upward migration of household income levels• Fast paced urbanization to rise from 28% to 40% by
2020• Middle class expanding by 30 - 40 million every year
Stunning Growth Rates! India• Passenger car sales grew by
10.84% and crossed the 1 million mark in 2006-07 and record sales of 1,076,408 vehicles.
• Utility vehicles sales grew by almost 12.2% in April-May 2007 and this segment is expected to grow at 20% by 2010.
• Multi purpose vehicles sales grew by almost 21.93% in April-May 2007 compared to the same period last year.
Expected Growth by 2015-16Potential Vehicle sales in India in 2015 - 06 ( in mn)
2.65
0.64
27.8
0.87
0 10 20 30
2015-16
Cars CVs Two wheelers Three Wheelers
• Expected to grow at 13% p.a over the next decade to reach around USD 120 - 159 bn by 2016.
Exports Potential to become the Global Outsourcing Hub
Export of auto components
(USD million )
456 625 578 760
1,800
10201400
FY00 FY01 FY02 FY03 FY04 FY05 FY06
25%
• Indian vehicle exports- over 40 % over the last few years, while Component exports -25 % per annum. Key exporters include:
• Tata Motors , Ashok Leyland, Maruti, M & M and Hyundai
•Allows automatic approval for foreign equity investment upto 100% in the automotive sector.
•Weighted tax deduction of upto 15% for in-house research and R & D activities.
Government Regulations & Growth
Key players of Automobile sector• Commercial vehicles• TATA Motors, Ashok Leyland, Swaraj
Mazda, Mahindra & Mahindra ,Force motors, Eicher Motors
• Passenger vehicle• TATA Motors, Maruti Udyog, Honda
Motors, Toyata, Skoda, Mahindra & Mahindra, GM, Ford, Hindustan Motors.
TATA’s Financials Rs in mn
Particulars Mar ' 08 Mar ' 07 Mar ' 06Net Sales 35,413 32,067 206022
% age growth 10.4 35.8 18.27%
Net profit 2,127 2,127 15288.8
%age growth 3.4 21.5 23.6%
B/S as on.. 261182.60 191640.50 163220.50
EPS (Rs.) 52.63 49.65 39.94
CFPS (Rs.) 69.55 64.87 53.54Book Value (Rs.) 202.54 177.33 143.58
DPS (Rs.) 15.00 15.00 13.01
TATA’s SHAREHOLDING• Indian Promoters : 33.7%• Foreign collaborators : 0.0%• Indian inst/Mutual Fund : 14.2%• FIIs/GDR : 32.8%• Free float : 19.3%• Shareholders : 221,403• Listed on BSE: 500570 (scrip no.) NSE: TATA Motors NYSE: TTM
Projects 2008 & onwards
• Compressed Air Car• Tata Nano• Low cost low carbon
vehicle• Land rover & Jaguar• Electric vehicles
Some facts of performance
• The company has incurred a capex of Rs 30bn till date and expects to spend another Rs 5-7bn in Q4FY08E.
• Tata Motors Ltd’s net sales grew by 4.2% y-o-y while its net profit fell by 2.8% y-o-y.
• Tata Nano was expected to be on the roads sometime in October,2008, but it is not.
Contnd…..
• Expected CV (Trucks) volume growth forecast by 13% for FY08-10E.
• Expect large orders even from company like DTC (Delhi Transport Corporation), which is ordering 8,000 buses ($1bn order) in anticipation of the 2010 Commonwealth Games.
• Planning to acquire Foreign Brands
Expected Growth Rate ‘g’• On the basis of Global, domestic & companies past
growth and projected cash flows, we estimate that ‘g’ will be 6.55 in year 09, 10.2% in year 10 & constant thereafter.
Y/E March (Rs cr) FY2007 FY2008 FY2009E FY2010E
Net Sales 32,067 35,413 38,366 42,202
% chg 35.8 10.4 8.3 10.0
Net Profit 2,127 2,053 1,921 2,116
% chg 21.5 3.4 6.5 10.2
EPS (Rs) 38.3 40.0 34.3 44.9
Calculation of ‘k’
• Re= Rf+b(Rm-Rf)• Rf=6%• Rm=18-20% (or average 19%)• B=0.8
• So, Re=6+0.8(19-6) =16.4%
Future Cash flows
Particulars 2008 (FCFE) 2009 (FCFE)@6.55 2010 (FCFE)@10.2%
Cash flow per share 69.55 (given) 74.11 81.67
Value at terminal year (V2) =81.67/(.164-0.066)=81.67/0.098=833.37
Present value =74.11/(1+0.066)=69.52
=833.37/(1+0.164)^2=617.3
Intrinsic value =69.52+617.3=686.82
Conclusion • Current market price Rs. 500.15(NSE) & 500(BSE)• Intrinsic value Rs. 686.82
• Undervalued.
• Buy Tata’s share, because it is underperforming due to its declining profit & sales figures in the last few years (because of heavy capital expenditure in some projects and foreign acquisitions, its cash outflow was much more than inflows).
Thank You