What Will Be The Jump In Tata Motors’ Valuation If Jaguar Land Rover Sells More Cars Than Expected?

Jaguar Land Rover forms more than 90% of Tata Motors‘ (NYSE:TTM) valuation, as per our estimates. The newly released compact sedan Jaguar XE has formed more than 50% of Jaguar’s net volumes in the last six months. Seeing the high demand for compact cars and SUVs, and Jaguar Land Rover’s new launches such as the Jaguar XE and F-Pace compact performance crossover, Jaguar’s unit sales could rise at a CAGR of 15% between fiscal 2017 (ending March 2017) and 2020, up from a currently estimated CAGR of 9%, and Land Rover’s unit sales could rise at a CAGR of 10%, up from the 7% CAGR estimated currently. A higher proportion of compact vehicles will also make the average revenue per model decline, but as automotive companies tend to have a high degree of operating leverage, higher volume sales should increase profits on incremental sales. Thus, giving a boost to the EBITDA margin.

According to our estimates, this scenario will entail an almost 20% rise in Tata Motors’ equity valuation in fiscal 2020.

Have more questions on Tata Motors? See the links below.

• How Will Tata Motors’s Valuation Be Impacted If Jaguar Land Rover Sells Fewer Cars Than Estimated?
• Where Does Jaguar Land Rover Stand Relative To The German Top 3 In Crucial Markets?
• What’s Tata Motors’s Fundamental Value Based On Expected Fiscal 2016 Results?
• How Has Tata Motors’s Revenue And EBITDA Composition Changed Over FY12-FY16?
• By What Percentage Have Tata Motors’s Revenues And EBITDA Grown Over The Last Five Years?
• What Is Tata Motors’s Revenue And EBITDA Breakdown?
• Where Will Tata Motors’s Revenue And EBITDA Growth Come From Over The Next Three Years?
• Why Jaguar Land Rover Forms More Than 90% Of Tata Motors’ Valuation

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