Mumbai, Oct. 31: Goldman Sachs feels the market capitalisation of Tata Motors will more than double to $30 billion by 2016-17 if its UK subsidiary Jaguar Land Rover (JLR) successfully implements its strategies. The investment bank also expects cash flows at Tata Motors to double over the same period.
The Goldman view fuelled a rally in the Tata Motors’ scrip and, on the BSE, the stock rose Rs 6.95 to close at Rs 254.65. The investment bank has a buy rating with a 12-month target price of Rs 334. The current market capitalisation of the company is $13.6 billion.
JLR has been a key driver of Tata Motors’ performance over the past few quarters, particularly at a time the domestic auto industry has been hit by a slowdown, with Tata Motors facing competition from aggressive players such as M&M.
Goldman analysts Sandeep Pandya and Sumeet Jain in their report said JLR had about 30 product actions planned for the next three to five years. These are about new platforms for the Range Rover, Defender and entering new markets with smaller and lighter vehicles along with premium cars.
“Tata Motors has transformed into a global manufacturer of luxury vehicles in 2009-12 from being a producer of India-focussed trucks and utility vehicles up to 2008.”
JLR is driving about 67 per cent of revenues, over 80 per cent of operating profits (as of March 31, 2012) and is currently the fastest growing business within the company.
“Our comparison of changes in return on capital for JLR against over 100 companies under our global auto and auto parts coverage suggests that JLR’s turnaround does not appear to be merely cyclical in nature,” the analysts said.