Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Motors
Overweight; TAMO.BO, TTMT IN
3Q FY11 PAT of Rs24.2B surprises on record margins at JLR; we raise our PT
• Tata Motors’ 3Q PAT of Rs24.2B was significantly above estimates. The
growth was driven by JLR, which reported a profit of GBP275MM (cRs19B),
while the standalone business reported a PAT of Rs4.1B.
• Jaguar Land Rover results surprise: JLR reported revenues of GBP2.7B
(+36% yoy) driven by +11% yoy growth in volumes at 63,155 units and a +22%
yoy & +3% qoq increase in realizations. The realization growth was driven by
better product / pricing mix – higher sales of premium vehicles such as Range
Rovers, XJ. EBITDA margins expanded to 17.4% (+80bp qoq), given the
favorable product mix, and richer regional mix – as the company is facing a
shortage of engines, it allocated products to more attractive markets. Also,
currently variable incentives are at one of the lowest levels, given robust
demand. The company increased its amortization expenses over 3Q (GBP 56m),
given that new launches were introduced.
• Standalone results were in-line: The domestic business reported a PAT of
Rs.4.1B (+3% yoy), which was in line with our estimate. While realizations
increased 9% yoy on price increases and favorable product mix, margins
declined to 10.4% (-240bp yoy) on higher commodity costs. (However, margins
expanded +60bp qoq given that price increases partially offset cost pressures).
• Outlook: We believe that the sales outlook at JLR continues to be healthy –
while the OEM is ramping up its distribution network in China, growth is
reviving in the developed markets (i.e. particularly the US). Further, the launch
of the Evoque this summer will drive volume growth over FY12. On the
domestic segment, we believe that growth rate for M/HCV’s will moderate,
given a demanding base effect and moderating IIP growth.
• Revising estimates higher: We are raising our consolidated estimates by c.9%
to factor in the robust 3Q financial results. Price target: We are raising our
Sep’11 PT to Rs1,380 based on our sum-of-the-parts valuation (in-line with our
previous valuation methodology). While we are lowering our core business
multiple to 8.0x EV/EBITDA (given moderating local growth), we value the
JLR business at 3.5x EV/EBITDA (a 15% discount to global luxury OEMs).
Risks: Slower-than-expected growth in the developed markets would have an
impact sales at JLR and any potential slowdown in India would affect growth
rates for CVs.
Price target revision
We are raising our Sep’11 PT to Rs1,380 based on our sum-of-the-parts valuation (in
line with our previous valuation methodology). While we are lowering our core
business multiple to 8.0x EV/EBITDA (given moderating local growth), we now
value the JLR business at 3.5x EV/EBITDA (at a 15% discount to multiples for
global luxury OEM). We are changing our valuation methodology for JLR to
EV/EBITDA, based on the changes in valuation made by our European auto analyst,
Ranjit Unnithan – please see his note European Auto Manufacturers dated 20
January 2011. He now bases his earnings estimates on EV/EBITDA multiples, rather
than EV/Sales used earlier, as he believes that given ‘normal’ earnings, it is
appropriate to value auto companies on earnings multiples rather than EV/Sales
multiples which are useful for depressed earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Motors
Overweight; TAMO.BO, TTMT IN
3Q FY11 PAT of Rs24.2B surprises on record margins at JLR; we raise our PT
• Tata Motors’ 3Q PAT of Rs24.2B was significantly above estimates. The
growth was driven by JLR, which reported a profit of GBP275MM (cRs19B),
while the standalone business reported a PAT of Rs4.1B.
• Jaguar Land Rover results surprise: JLR reported revenues of GBP2.7B
(+36% yoy) driven by +11% yoy growth in volumes at 63,155 units and a +22%
yoy & +3% qoq increase in realizations. The realization growth was driven by
better product / pricing mix – higher sales of premium vehicles such as Range
Rovers, XJ. EBITDA margins expanded to 17.4% (+80bp qoq), given the
favorable product mix, and richer regional mix – as the company is facing a
shortage of engines, it allocated products to more attractive markets. Also,
currently variable incentives are at one of the lowest levels, given robust
demand. The company increased its amortization expenses over 3Q (GBP 56m),
given that new launches were introduced.
• Standalone results were in-line: The domestic business reported a PAT of
Rs.4.1B (+3% yoy), which was in line with our estimate. While realizations
increased 9% yoy on price increases and favorable product mix, margins
declined to 10.4% (-240bp yoy) on higher commodity costs. (However, margins
expanded +60bp qoq given that price increases partially offset cost pressures).
• Outlook: We believe that the sales outlook at JLR continues to be healthy –
while the OEM is ramping up its distribution network in China, growth is
reviving in the developed markets (i.e. particularly the US). Further, the launch
of the Evoque this summer will drive volume growth over FY12. On the
domestic segment, we believe that growth rate for M/HCV’s will moderate,
given a demanding base effect and moderating IIP growth.
• Revising estimates higher: We are raising our consolidated estimates by c.9%
to factor in the robust 3Q financial results. Price target: We are raising our
Sep’11 PT to Rs1,380 based on our sum-of-the-parts valuation (in-line with our
previous valuation methodology). While we are lowering our core business
multiple to 8.0x EV/EBITDA (given moderating local growth), we value the
JLR business at 3.5x EV/EBITDA (a 15% discount to global luxury OEMs).
Risks: Slower-than-expected growth in the developed markets would have an
impact sales at JLR and any potential slowdown in India would affect growth
rates for CVs.
Price target revision
We are raising our Sep’11 PT to Rs1,380 based on our sum-of-the-parts valuation (in
line with our previous valuation methodology). While we are lowering our core
business multiple to 8.0x EV/EBITDA (given moderating local growth), we now
value the JLR business at 3.5x EV/EBITDA (at a 15% discount to multiples for
global luxury OEM). We are changing our valuation methodology for JLR to
EV/EBITDA, based on the changes in valuation made by our European auto analyst,
Ranjit Unnithan – please see his note European Auto Manufacturers dated 20
January 2011. He now bases his earnings estimates on EV/EBITDA multiples, rather
than EV/Sales used earlier, as he believes that given ‘normal’ earnings, it is
appropriate to value auto companies on earnings multiples rather than EV/Sales
multiples which are useful for depressed earnings.
No comments:
Post a Comment