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NEW DELHI: Don't judge a book by its cover.
This automaker might just well fit the bill.
The intent is clear, given its 'Turnaround 2.0' strategy.
The mantra is: Forget Plan A, if it's not working.
Go for Plan B instead.
Tata Motors is doing precisely that.
It's determined to revive its domestic growth story even as international business holds the key.
After six years of market share slide in domestic commercial vehicle (CV) segment and four years in passenger vehicles (PVs), the automaker is back on the path to a turnaround.
The results have started showing.
The Tata Group major improved its Indian market share in CV space by 70 bps to 45.1 per cent.
Its PV segment saw 50 bps jump in domestic market share at 5.7 per cent, thanks to a couple of new launches and increased customer and dealer interactions.
Analysts are hopeful and see this stock gaining up to 60 per cent in the next one year after a not-so-memorable five years.
At Tuesday's price, the stock is up a mere 6 per cent in the past 5 years.
The company wants to win decisively the CV race where it's still the market leader and pull ahead in PVs where it is a challenger.
It's keen to weave the turnaround theme into the organisation's culture.
The question is, can it
"While Tata Motors has its fair share of risks, Street earnings downgrades and consequent stock underperformance seems to have reflected that.
JLR and India earnings have bottomed out," Axis Capital said in a note.
In the CV space, the company has recently launched 14 new Ultra trucks in 7.5-16T segment.
It is looking to strengthen product planning to address white spaces, look into modularity and architecture approach in product development and enhance customer engagement.
In addition, it is initiating cost reduction initiatives and is said to have 'robust pipeline of ideas' for implementation.
Tata Motors is optimistic about double-digit volume growth in CVs over the next two years, driven by an uptick in CV cycle, noted JM Financial.
As for PVs, the automaker is focussed on sales enhancement through new model launches and network expansion, better quality, structural cost reductions, and affordable and efficient capex.
It will be out with new models based on new Alfa and Omega architectures in 2019.
According to the management, rigorous turnaround plans for the PV business are under way.
All are, however, linked to how its international business pans out.
Globally, Jaguar and Land Rover (JLR) is flexing muscles, with May sales surging 6 per cent yoy to 41,600.
Jaguar retails increased 7 per cent on-year to 14,500 units while Land Rover (LR) volumes went up 6 per cent to 33,800 units.
"We believe the stock is currently pricing in the extreme pessimism of a flattish volume growth for JLR for FY19E.
We have factored in a volume CAGR of 7 per cent over FY19-20E for JLR.
YTD FY19 retail volume growth for JLR stands at 9 per cent with China yet to bounce back.
We remain watchful of Europe and UK growth sustainability," said Elara Capital.
The management, Elara Capital said further, has highlighted its path to sustained FCF and achieving EBIT margin guidance of 3-5 per cent.
It sees the current risk-reward for Tata Motors "extremely favourable".
The brokerage has a target price of Rs 362 on the stock.
The stock performance in the last 5 years is anything but impressive.
BSE data showed that the share price stood at Rs 289.97 on June 11, 2013.
Five years on, the scrip price as of Thursday's close (June 14, 2018) stands at Rs 305.75, jump of a mere
5.44 per cent.
The stock was down 17 per cent in May - the worst Nifty loser for the month.
But select brokerages are a hopeful bunch on the company's Turnaround 2.0 strategy.
Foreign brokerage Jefferies has 'buy' rating on the stock with a target price of Rs 440.
"Our fair value of Rs 440 per share is based on 9x FY20E P/E for JLR (Rs 370), in line with peers and 13x P/E for domestic business (Rs 70), at a discount to peers," it said.
Macquarie has 'Outperform' on the stock with a 12-month target price of Rs 485.
It sees JLR volume growth and OPM (operating profit margin) improvement in India and JLR as the main growth catalysts.
Motilal Oswal says nearly 50 per cent of volumes are likely to come from new and refreshed products over the next two years, as it launches two new products, six refreshes and forays into the EV space before its peers.
"We expect JLR's volumes (including JV) to grow at a CAGR of 9 per cent over FY18-20, driven by 18 per cent CAGR for Jaguar and 6 per cent CAGR for LR on the back of the launch of two new models and six major refreshes," it added.
The brokerage has 'buy' on the stock with a target price of Rs 471.
Axis Capital pencills in 46 per cent upside for the stock and has set target price of Rs 417 with a 'buy' rating.
The m-cap of the company stands at Rs 87,298.99 crore.
The auto major was down 1 per cent at Rs 302.35 on the BSE today.
