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Consolidated results beat estimates on robust JLR performance: Tata Motors
(TML) reported impressive results for yet another quarter of FY2011, beating
street’s as well as our expectations. On a consolidated basis, the company
reported strong 21.7% yoy and 10.1% qoq growth in net sales to `31,685cr, led
by robust performance of JLR and better-than-expected performance at the
standalone level. Operating margin improved substantially by 276bp yoy and
26bp qoq to 14.2% on the back of improved operational performance at JLR and
favourable currency movement. As a result, net profit for the quarter grew
significantly by 272.9% yoy to `2,425cr.
Standalone results driven by volume growth and higher average realisation: On
standalone basis, TML reported ~28% yoy growth in its top line, aided by the
~17% yoy jump in volumes and ~9.3% yoy growth in net realisation. Operating
margin stood at 10.1%, down 243bp yoy due to raw-material cost pressures.
Thus, net profit reported a ~3% yoy increase to `410cr.
Outlook and valuation: We maintain our positive stance on the company,
considering its impressive operating performance especially on the JLR front. We
maintain Buy with an SOTP Target Price of `1,384. We have valued the domestic
core business at `406/share, implying 13x FY2012E earnings. Our embedded
value of the subsidiaries and investments in TML's books (including JLR) works out
to `978/share. We have valued JLR at 7x FY2012E earnings, in line with its peers.
Standalone performance ahead of expectations: For 3QFY2011, TML reported
28.3% yoy growth in its top line to `11,520cr, ahead of our estimates of
`10,922cr, aided by 17.4% yoy growth in volumes and ~9.3% yoy growth in
average net realisation. On a qoq basis, however, the top line remained flat as
volumes registered a decline of 5.8%. Volume growth was restricted on account of
supply constraints due to emission norm changes. Realisation improved on
account of better product mix (higher share of commercial vehicles) and price
increases carried out during the quarter. The company’s operating margin stood at
10.1% (v/s 9.2% est.), posting a decline of 243bp yoy due to a 372bp increase in
raw-material cost and a 90bp increase in other expenses. As a result, net profit
registered a marginal 2.5% yoy increase to `410cr, better than our estimates of
`350cr.
Outstanding consolidated performance: TML reported strong 21.7% yoy and
10.1% qoq growth in net sales to `31,685cr (v/s `28,870cr est.), led by robust
performance of JLR and better-than-expected performance at the standalone level.
Total volumes in the domestic markets grew by 17.4% yoy, while JLR volumes
jumped by 11.3% yoy.
On the operating front, margin improved by a substantial 276bp yoy and 26bp
qoq to 14.2% (v/s 12.8% est.) on the back of improved operational performance
at JLR. Further, favourable currency movement average (GBP/USD for 3QFY2011
was 1.58 v/s 1.63 for 3QFY2010 and average GBP/EUR for 3QFY2011 was 1.16
v/s 1.11 for 3QFY2010) and restructuring efforts at JLR helped margin expansion
at the consolidated level. As a result, net profit for the quarter grew significantly by
272.9% yoy to `2,425cr (v/s `1,920cr est.).
TML's total gross debt, on a consolidated basis, decreased on a qoq basis to
~`34,000cr (`36,565cr in 2QFY2011). The consolidated net automotive debt-toequity
ratio stood at around 0.8 as on December 31, 2010, post the QIP issuance.
Stellar performance by JLR continues: JLR reported better-than-expected
performance during the quarter. Net sales registered robust 35.6% yoy (18.4%
qoq) growth to £2,660mn primarily due to an 11.3% yoy (14.5% qoq) increase in
volumes and an impressive ~21.8% yoy (3.3% qoq) jump in average net
realisation. Volume growth at the retail level was particularly strong in China (up
72%), Russia (up 24%) and North America (up 16%). Further, a shift in product mix
towards higher-margin vehicles as well as reduction in discounts or subventions on
new product launches led to better average realisations on a yoy and qoq basis.
On the operating front, JLR recorded a substantial 762bp jump in operating
margins to 17.4%, owing to improved operating leverage, favourable currency
movement and cost-cutting measures initiated by the company. Hence, PAT
witnessed 75.2% yoy and 15.5% qoq growth during 3QFY2011.
Thus, on overall excellent performance, we revise our PAT estimates upwards for
JLR to £972mn and £1,076mn for FY2011 and FY2012, respectively.
Subsidiaries showing substantial growth in performance: TML’s other key
subsidiaries combined further recorded a 9.4% yoy increase in net sales to around
`1,449cr (`1,325cr) in 3QFY2011. On account of the increase in net sales in
almost all its subsidiaries (except for Tata Motor Finance) and improved operating
leverage, subsidiaries combined recorded a yoy increase in net profit for the
quarter to `98cr (`90cr). HVAL and HVTL reported significant improvement in the
top line and bottom line, owing to continued growth in domestic MHCV volumes.
Subsidiaries also plan to venture into manufacturing axles for the LCV range of
vehicles and construction equipment.
Total vehicle financing disbursals (TMF) for 3QFY2011 stood at `1,855cr, an
increase of 17.6% yoy, mainly on account of significant volume traction in the
domestic four-wheeler industry. The book size at the end of December 2010 for
TMF and TML (vehicle financing) stood at `8,294cr and `331cr, respectively.
TMF’s market share for 9MFY2011 stood at 19.5%. NIM of the vehicle financing
business (TMF) for 3QFY2011 stood at 10.3%.
Outlook and valuation
FY2010 was a year of recovery for TML’s standalone business. The cut in interest
rates and overall improvement in the financing scenario helped TML in reporting
better volume growth in FY2010. Volume traction continued during 9MFY2011,
with improved liquidity and further improvement in IIP. Our estimates for TML
factor in a ~14% CAGR in commercial vehicle (CV) volumes over FY2010–12E
and a ~36% CAGR in passenger vehicle (PV, including Nano) volumes. Following
recovery in its core business, TML’s key subsidiaries (linked to the fortunes of CVs)
are also expected to show good results.
Moreover, with the positive trend in the external environment (in financial markets
and improvement in general liquidity), TML has met most of its funding
requirements (including JLR) at reasonable terms. Further, full recovery in the
domestic CV cycle reduced the pressure on cash flows and has facilitated debt
repayment. JLR has also recorded excellent recovery, aided by good recovery in its
key markets. We expect the launch of new products in CY2011 to help JLR register
a ~17% volume CAGR over FY2010–12E.
We estimate TML to record a 191% CAGR in net profit over FY2010–12E on a
consolidated basis, owing to the better-than-expected recovery in JLR. At `1,145,
on a consolidated basis, the stock is trading at 8.8x and 8.3x FY2011E and
FY2012E earnings, respectively. Valuing the company on SOTP basis, we maintain
our Buy recommendation with a revised Target Price of `1,384 (`1,458). We have
valued the domestic core business at `406/share, implying 13x FY2012E earnings.
Our embedded value of the subsidiaries and investments in TML's books (including
JLR) works out to `978/share. We have valued JLR at 7x FY2012E earnings, in line
with its peers.
Key downside risk to our estimates: Lower-than-expected growth in IIP and credit
cycle would in turn result in lower offtake of CVs and PVs, which can impact our
standalone numbers. Further, lower-than-expected recovery in the overseas market
can affect our growth estimates at the JLR front.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Motors – 3QFY2011 Result Update
Angel Broking maintains a Buy on Tata Motors with a Target Price of Rs. 1,384.
Consolidated results beat estimates on robust JLR performance: Tata Motors
(TML) reported impressive results for yet another quarter of FY2011, beating
street’s as well as our expectations. On a consolidated basis, the company
reported strong 21.7% yoy and 10.1% qoq growth in net sales to `31,685cr, led
by robust performance of JLR and better-than-expected performance at the
standalone level. Operating margin improved substantially by 276bp yoy and
26bp qoq to 14.2% on the back of improved operational performance at JLR and
favourable currency movement. As a result, net profit for the quarter grew
significantly by 272.9% yoy to `2,425cr.
Standalone results driven by volume growth and higher average realisation: On
standalone basis, TML reported ~28% yoy growth in its top line, aided by the
~17% yoy jump in volumes and ~9.3% yoy growth in net realisation. Operating
margin stood at 10.1%, down 243bp yoy due to raw-material cost pressures.
Thus, net profit reported a ~3% yoy increase to `410cr.
Outlook and valuation: We maintain our positive stance on the company,
considering its impressive operating performance especially on the JLR front. We
maintain Buy with an SOTP Target Price of `1,384. We have valued the domestic
core business at `406/share, implying 13x FY2012E earnings. Our embedded
value of the subsidiaries and investments in TML's books (including JLR) works out
to `978/share. We have valued JLR at 7x FY2012E earnings, in line with its peers.
Standalone performance ahead of expectations: For 3QFY2011, TML reported
28.3% yoy growth in its top line to `11,520cr, ahead of our estimates of
`10,922cr, aided by 17.4% yoy growth in volumes and ~9.3% yoy growth in
average net realisation. On a qoq basis, however, the top line remained flat as
volumes registered a decline of 5.8%. Volume growth was restricted on account of
supply constraints due to emission norm changes. Realisation improved on
account of better product mix (higher share of commercial vehicles) and price
increases carried out during the quarter. The company’s operating margin stood at
10.1% (v/s 9.2% est.), posting a decline of 243bp yoy due to a 372bp increase in
raw-material cost and a 90bp increase in other expenses. As a result, net profit
registered a marginal 2.5% yoy increase to `410cr, better than our estimates of
`350cr.
Outstanding consolidated performance: TML reported strong 21.7% yoy and
10.1% qoq growth in net sales to `31,685cr (v/s `28,870cr est.), led by robust
performance of JLR and better-than-expected performance at the standalone level.
Total volumes in the domestic markets grew by 17.4% yoy, while JLR volumes
jumped by 11.3% yoy.
On the operating front, margin improved by a substantial 276bp yoy and 26bp
qoq to 14.2% (v/s 12.8% est.) on the back of improved operational performance
at JLR. Further, favourable currency movement average (GBP/USD for 3QFY2011
was 1.58 v/s 1.63 for 3QFY2010 and average GBP/EUR for 3QFY2011 was 1.16
v/s 1.11 for 3QFY2010) and restructuring efforts at JLR helped margin expansion
at the consolidated level. As a result, net profit for the quarter grew significantly by
272.9% yoy to `2,425cr (v/s `1,920cr est.).
TML's total gross debt, on a consolidated basis, decreased on a qoq basis to
~`34,000cr (`36,565cr in 2QFY2011). The consolidated net automotive debt-toequity
ratio stood at around 0.8 as on December 31, 2010, post the QIP issuance.
Stellar performance by JLR continues: JLR reported better-than-expected
performance during the quarter. Net sales registered robust 35.6% yoy (18.4%
qoq) growth to £2,660mn primarily due to an 11.3% yoy (14.5% qoq) increase in
volumes and an impressive ~21.8% yoy (3.3% qoq) jump in average net
realisation. Volume growth at the retail level was particularly strong in China (up
72%), Russia (up 24%) and North America (up 16%). Further, a shift in product mix
towards higher-margin vehicles as well as reduction in discounts or subventions on
new product launches led to better average realisations on a yoy and qoq basis.
On the operating front, JLR recorded a substantial 762bp jump in operating
margins to 17.4%, owing to improved operating leverage, favourable currency
movement and cost-cutting measures initiated by the company. Hence, PAT
witnessed 75.2% yoy and 15.5% qoq growth during 3QFY2011.
Thus, on overall excellent performance, we revise our PAT estimates upwards for
JLR to £972mn and £1,076mn for FY2011 and FY2012, respectively.
Subsidiaries showing substantial growth in performance: TML’s other key
subsidiaries combined further recorded a 9.4% yoy increase in net sales to around
`1,449cr (`1,325cr) in 3QFY2011. On account of the increase in net sales in
almost all its subsidiaries (except for Tata Motor Finance) and improved operating
leverage, subsidiaries combined recorded a yoy increase in net profit for the
quarter to `98cr (`90cr). HVAL and HVTL reported significant improvement in the
top line and bottom line, owing to continued growth in domestic MHCV volumes.
Subsidiaries also plan to venture into manufacturing axles for the LCV range of
vehicles and construction equipment.
Total vehicle financing disbursals (TMF) for 3QFY2011 stood at `1,855cr, an
increase of 17.6% yoy, mainly on account of significant volume traction in the
domestic four-wheeler industry. The book size at the end of December 2010 for
TMF and TML (vehicle financing) stood at `8,294cr and `331cr, respectively.
TMF’s market share for 9MFY2011 stood at 19.5%. NIM of the vehicle financing
business (TMF) for 3QFY2011 stood at 10.3%.
Outlook and valuation
FY2010 was a year of recovery for TML’s standalone business. The cut in interest
rates and overall improvement in the financing scenario helped TML in reporting
better volume growth in FY2010. Volume traction continued during 9MFY2011,
with improved liquidity and further improvement in IIP. Our estimates for TML
factor in a ~14% CAGR in commercial vehicle (CV) volumes over FY2010–12E
and a ~36% CAGR in passenger vehicle (PV, including Nano) volumes. Following
recovery in its core business, TML’s key subsidiaries (linked to the fortunes of CVs)
are also expected to show good results.
Moreover, with the positive trend in the external environment (in financial markets
and improvement in general liquidity), TML has met most of its funding
requirements (including JLR) at reasonable terms. Further, full recovery in the
domestic CV cycle reduced the pressure on cash flows and has facilitated debt
repayment. JLR has also recorded excellent recovery, aided by good recovery in its
key markets. We expect the launch of new products in CY2011 to help JLR register
a ~17% volume CAGR over FY2010–12E.
We estimate TML to record a 191% CAGR in net profit over FY2010–12E on a
consolidated basis, owing to the better-than-expected recovery in JLR. At `1,145,
on a consolidated basis, the stock is trading at 8.8x and 8.3x FY2011E and
FY2012E earnings, respectively. Valuing the company on SOTP basis, we maintain
our Buy recommendation with a revised Target Price of `1,384 (`1,458). We have
valued the domestic core business at `406/share, implying 13x FY2012E earnings.
Our embedded value of the subsidiaries and investments in TML's books (including
JLR) works out to `978/share. We have valued JLR at 7x FY2012E earnings, in line
with its peers.
Key downside risk to our estimates: Lower-than-expected growth in IIP and credit
cycle would in turn result in lower offtake of CVs and PVs, which can impact our
standalone numbers. Further, lower-than-expected recovery in the overseas market
can affect our growth estimates at the JLR front.
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