TALKS OF FURTHER STRENGTHENING INDIAN BUSINESS AT ANALYST DAY

News: Tata Motors conducted analyst day for its Indian business yesterday. Key takeaways from the meet are: (i) Indian CV business: (a) It expects domestic CV industry to grow at 4-5% in terms of volume over FY24-30, supported by favourable macro environment (b) will work upon gaining market share across segments especially Small CV space (c) increase share of non-vehicle business from low-mid teens to ~20% in medium term, which is structural and not cyclical (d) focus on exports (e) further strength the double digit margin profile (10.8% in FY24) and return ratios (~36% in FY24) (f) maintain technology leadership in terms of powertrain capability with strong play in Electric bus as well as Electric LCV domain. (ii) Indian PV business: (a) increase offerings thereby increasing the addressable market size from ~53% currently to ~80% with leading market share in sub-segments (b) play decisively in the alternate fuels such as CNG (c) further grow the market in EV domain with focus on market leadership as well as development of charging infrastructure (d) improve domestic market share from ~14% to ~16% by FY27 and ~18-20% by FY30 through product interventions and shift towards greener fuels.

Views: The event showcased company’s capability across different powertrain technologies especially zero emission products, readiness with respect to new tech enabled vehicles and serious intent to grow the non-vehicle business. It expects CV demerger to be largely complete by July 2025 with capex spend on the CV side pegged at ~2-4% of sales with sustainable FCF expected at ~6-8% and strong RoCE matrix. On the PV side it expects capex to be tad higher at ~6-8% of sales largely on new product development (capacity already enhanced to 1 million units, ~2x current volumes run-rate). On the EV side it has pegged Capex at ₹ 16-18k crore over FY24-30E with EV penetration expected at ~30% in its portfolio by FY30 and EBITDA breakeven in FY26. On an overall basis, it talked about further strengthening the already profitable Indian business with strong ambition to grow ahead of industry in a sustainable way. We have a positive view on the company and it offers a good portfolio play.

Impact: Positive