Tata Motors: I Expect Positive 2023 FCF, And It Is Cheap

Jan. 31, 2022 3:32 AM ETTata Motors Limited (TTM) StockTTM

Summary

  • Tata is a global automotive manufacturer, and the owner of luxury brands Jaguar and Land Rover.
  • I am quite optimistic about the company's new strategy, which targets the production of modern luxury vehicles and services. More luxury vehicles will most likely enhance the company's FCF margins.
  • In my opinion, if management continues to offer more and more electrified models like the company did in 2020 and 2021, revenue and FCF will most likely trend north.
  • My CAPM model includes a beta of 1.5, cost of equity of 13%, and cost of debt around 5%. The WACC stands at somewhere close to 9%.
  • Most competitors trade at close to 7x-8x forward EBITDA, so I assumed that the company's 2032 EV/EBITDA multiple would be close to this mark.
Closeup hand giving a car key and money for loan credit financial, lease and rental concept

Nattakorn Maneerat/iStock via Getty Images

Tata Motors (TTM) expects to increase the offering of electric vehicles in the next decade, and management is also offering a new electrical vehicle architecture. As a result, market estimates include double-digit sales growth and positive free cash flow from 2023. Using very

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I am a hedge fund analyst based in Romania. I love DCF models. I started trading at 13, and also traded for one large institution. I write investment research to help retail investors.Note that I don't give financial advice. Nothing contained in my articles should be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.Feel free to reach out to me, via comments, on any questions you may have on my financial models.

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