Tata Motors: India Investor Day 2023

8 Jun 2023 , 10:13 AM

Analysts of IIFL Capital Services attended the Investor Day hosted by Tata Motors. Mgmt. elaborated on the success story of its PV franchise and detailed plans to regain ground in CVs, where TTMT has lost share. Mgmt. expectation of moderation of growth in PV/CV industries in FY24 is largely in line with analysts of IIFL Capital Services estimates. Meanwhile, the company would focus on improving margins (better pricing discipline already visible in CVs) and FCF (debt reduction target despite higher capex). Mgmt. reiterated aggressive plans to maintain leadership in the EV space (multiple launches planned), while also targeting positive Ebitda generation in the segment. In this context, Tata Group’s foray into Li-ion cell manufacturing should drive synergy for TTMT. Retain BUY with TP of Rs595.

Strong build-up in PVs, but CV franchise has lost some ground: 

In recent years, TTMT has gained significant share in PVs through launch of new models to fill portfolio gaps and combined it with better design, safety attributes and features. Monthly production capacity has increased from ~20k in Sep-2020 to more than 50k now, and would jump up to 85k, when the recently-acquired plant (from Ford) is integrated. On the other hand, TTMT has lost market-share in CVs, and plans to regain the same through better customer engagement, superior sales/service, improvement in brand perception and better technological offerings.

Focus on margins and FCF, even as industry growth is set to moderate: 

The PV and CV industries are set to moderate to single digit growth in FY24, after high growth in FY22/FY23. Mgmt. is focused on improving margins of both PV and CV segments in FY24, through improved mix, higher realisations (lower discounts, especially in CVs) and cost management. Despite higher capex expectations, mgmt. targets bringing down India net debt substantially in coming years.

Focus on EV leadership, combined with profitability: 

TTMT is planning to launch multiple EV models in coming years and reinforce its leadership in the space (80%+ share in PV EVs in FY23). It has an orderbook of 2-3 months in PV EVs currently. The Tata Group has forayed into EV batteries with plans to set up a Li-ion cell factory in Gujarat (investment of Rs130bn with initial capacity of 20GWh). While JLR and TTMT (India) would be captive customers (potential demand 60GWh), it may also cater to 2W/3W and energy storage.