US Tax Could Halve Tata Mo­tors’ EPS

Un­der the pro­posed bor­der tax, JLR could face an im­pact of $9,000 per ve­hi­cle on its US vol­umes, says Deutsche Bank

The Economic Times - - Companies: Pursuit Of Profit -

Mum­bai: Deutsche Bank has es­ti­mated that the pro­posed bor­der tax ad­just­ments in the United States could hit au­tomaker Tata Mo­tors’ earn­ings per share (EPS) by 50%.

In a note re­leased last Fri­day, the bank said an anal­y­sis of bor­der tax ad­just­ments be­ing pro­posed un­der House speaker Paul Ryan’s “Bet­ter Way” tax re­form plan in the US in­di­cates sig­nif­i­cant neg­a­tive im­pact for auto mak­ers that rely on im­port of com­po­nents or fully built cars for sales in the US.

In Tata Mo­tors’ case, the US ac­counts­for20%of sub­sidiaryJaguar Land Rover Automotive Plc’s global vol­umes. This vol­ume is ex­ported from the UK and there is no assem­bly in the US, said Deutsche Bank. Un­der the pro­posed bor­der tax ad­just­ments, cost of an av­er­age ve­hi­cle could in­crease by $2,300, while JLR could face an im­pact of $9,000 per ve­hi­cle on its US vol- TRUMP ERA & SPEEDBREAKERS

umes, the bank said.

“If we as­sume no price hikes, this could re­sult in Tata Mo­tors’ con­sol­i­dated EPS de­clin­ing by 50%,” it noted. On Mon­day, shares of Tata Mo­tors ended up 0.5% at ₹ 525.3 on the BSE.

Tata Mo­tors’ con­sol­i­dated EPS on a trail­ing ba­sis is ₹ 40.84. JLR achieved its best ever De­cem­ber sales­per­for­man­cein2016,with­to­tal re­tail sales ris­ing 12% from the pre­vi­ous year to 55,375 ve­hi­cles.

The bank said ab­so­lute level of im­pact will be known only when fi­nal pro­pos­als are an­nounced, and re­tained ‘buy’ rat­ing on the Tata Mo­tors stock with a tar­get price of ₹ 575. WithJLRsalesin­topgear,Tata Mo­tors shares have gained 62% in the last one year, out­per­form­ing the BSE Auto in­dex which has gained close to 34% in the same pe­riod.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.