keep buying on Tata Motors with target price of Rs 785. the acquisition at 5.9 times EV/EBIDTA of an entity that has 5.5% EBIDTA margins, (after charging USD 829 million of R&D spend) is not expensive at all. A valuation comparison with similar sized companies or companies with similar product profile, indicates that acquisition is reasonably priced. Similarly, contrary to the perception, despite of 45% equity dilution for funding the acquisition, the deal is not value destructive. Based on JLR’s CY07 numbers the acquisition is EPS neutral.
Tuesday, June 10, 2008
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