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Tata Motors announces price hike of Rs60,000 on PVs, stock up 1%

The price hike will be applicable to its Passenger Vehicle models effective April 1, 2018

India’s leading automaker, Tata Motors Limited (TML) announced a price hike of up to Rs60,000 on its Passenger Vehicle (PV) models effectively April 1, 2018. The price hike will vary depending on the model. As per Mr. Mayank Pareek, President, Passenger Vehicle Business, Tata Motors, the price hike was being taken to offset the effect of rising input costs, changing market conditions and external economic factors.

Our Take

TML has a slew of PV launches scheduled for CY2018 and CY2019 such as 45X, Tiago variant, Tigor variant, Q502, etc. Its PV portfolio has grown at 22% (in volumes) over Apr-17 to Feb-18 against industry growth of 7.5%. This was led by strong demand for its Tiago, Tigor, Nexon and Hexa models. Given the robust demand and rising input costs, the price hike is rightly timed.

TML, on the consolidated level, derives ~80% of its revenue (Q3FY18) from the wholly owned subsidiary, JLR. Volumes for JLR have been weak or negative for more than a year (declined 3% yoy in Feb’18). During Q3FY18, JLR saw some weakness due to run out of two of its models Range Rover and Range Rover Sport. However, standalone business saw more than 750bps yoy EBITDA margin expansion due to market share gains in CVs.

We expect JLR volumes to improve on account of three new launches over next 12-18 months (Velar, E-Pace, I-Pace, RR/RRS refresh). Steady improvement in market share in both standalone CV and PV segments would drive 13% revenue CAGR over FY18-20E. EBITDA margin expansion of 201bps is expected over FY18-20E.

Tata Motors Ltd is currently trading at Rs337.60 up by Rs1.85 or 0.55% from its previous closing of Rs335.75 on the BSE.

The scrip opened at Rs335.75 and has touched a high and low of Rs340.40 and Rs333.40 respectively. So far 36,34,803(NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs1,06,553.42cr.