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Tata Motors
JLR drives consolidated performance; maintain Buy
JLR surprises, India disappoints. JLR results beat our
expectations as profits grew 7.7% qoq to £238m. However, Tata
Motors’ (TML) Indian operations disappointed and the company
faced margin pressures there. We expect JLR to sustain its robust
performance, albeit with slightly lower margins. We reiterate Buy.
India operations disappoint. In 2QFY11, TML’s Indian
operations reported a 160-bp qoq dip in the EBITDA margin, on
higher raw material costs and an increase in ‘other expenditure’.
Hence, profit growth was just 15.7% (lower than our expected
34%).
2Q vs. 15.5% in 1Q. While volumes were 3.5% lower qoq,
realisation growth was 3%. The margin improvement was due to a
12.6% decline in ‘other expenditure’, mainly on account of a series
of measures previously taken.
Raise estimates; introduce FY13e. We raise our FY11e EPS to
`126 (7x yoy growth) and FY12e EPS to `137.3 (9% growth yoy).
We also introduce FY13e EPS at `160 (a 16.6% yoy rise).
Valuation and risks. We raise our target price for TML to `1,543
(from `923): a standalone value of `618 (20x FY12e earnings),
subsidiaries and associates at `181, and JLR at `744. Risks are
lower demand in Europe and US, decline in CV demand and
unfavourable currency movements
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