Buy Tata Motors JLR drives profitability yet again;; Anand Rathi

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Tata Motors
JLR drives profitability yet again; reiterate Buy
We raise our FY11e/ FY12e consolidated EPS to `132.6/`145.7
from `126.0/`137.3 on Tata Motors’ robust 3Q performance,
which was driven by a strong show at JLR; India performance
was as expected. JLR’s qoq performance shows little signs of
abating and we believe it will continue driving consolidated
performance. Re-iterate Buy.

 JLR – Key performance driver. JLR’s results were driven by
improved realizations, change in product mix (shift of focus
towards high-value products) and strong EBITDA growth. JLR’s
EBITDA margin grew to 17.4% (2QFY11:16.6%; 3QFY10: 9.8%)
while profit was up 4x yoy and 15.4% qoq to £275m.
 India operations in line. Tata Motors’ standalone 3QFY11
results were broadly in line with expectations. EBITDA grew
3.8% yoy to `11.9bn, while adjusted profit was up +2.5% yoy to
`4.3bn; both as per expectations. 3QFY11 EBITDA margin of
10.4% was impacted by yoy rise in raw material costs.
 Change in estimates. We increase our FY11e and FY12e
consolidated EPS to `132.6 (6.4x yoy growth) and `145.7 (10%
yoy growth) respectively, to factor in the strong JLR performance.
 Valuation and risks. We reiterate Buy and maintain target price
of `1,543 – standalone value `565 (17.5x FY12e earnings),
subsidiaries and associates at `177, and JLR at `801. Risks: lower
European and US demand; CV demand decline; adverse forex.