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Betting on Evoque
Tata Motors (TAMO) is the largest CV manufacturer in India
with a market share of ~60% each in both the M&HCV and
LCV segments. While the domestic M&HCV business is likely
to moderate, we believe the CV segment’s overall volume
growth would be driven by strong performance from the
LCV segment. During FY11-13E, we expect JLR’s volume
growth and margin profile to remain strong (largely driven
by Land Rover’s high-margin portfolio). We initiate
coverage with a BUY rating and SOTP-based target price of
Rs1,557 (Rs499 for standalone business, Rs942 for JLR
business and Rs116/share for its investments in
subsidiaries).
Evoque to drive JLR volumes: We expect JLR’s volume
growth to be largely driven by launch of Evoque. JLR is
expected to register volume growth of 14%/15% in
FY12E/FY13E compared to 25% in FY11E, largely driven by
the launch of Evoque in Land Rover’s portfolio. We have
factored volumes of 24,000 units and 57,600 units for
Evoque for FY12E/FY13E. We expect JLR to report EBITDA
margins of 14.9%/14.3%/14.2% in FY11E/FY12E/ FY13E
(YTDFY11 EBITDA margin stands at 15.3%) compared to
4.5% in FY10. Strong cash flows will sustain JLR’s planned
annual capex of UK£800-900mn, going forward.
M&HCV (goods) growth to moderate, but LCVs to
remain strong: We expect volume growth to moderate for
the M&HCV segment. Based on outlook for the industry, we
expect TAMO to register volume growth of 10.1%/10.2% in
the M&HCV segment over FY12E/FY13E compared to 23%
in FY11. The LCV segment will continue to remain strong
(volume growth of 19% and 19.4% FY12E/FY13E as
compared to 24% in FY11), largely driven by new product
launches and our positive view on demand scenario for
LCVs. However, market share gains in Passenger Vehicle
segment would remain challenging.
Consolidated debt and cash flow position to remain
strong: Driven by strong profitability and cash generation
from JLR’s operations, the current net automotive
debt/equity stands at 0.8x. This puts TAMO in a very
comfortable position from gearing perspective compared
to the high of 6x in Q2FY10 and 2.1x in Q1FY11.
Valuations and Recommendation: At the CMP of Rs1,250,
the stock is currently trading at 8.3x FY12E consolidated
EPS of Rs150 and 7.0x FY13E consolidated EPS of Rs180. We
initiate coverage with a BUY and a SOTP-based target price
of Rs1,557 (Rs499 for the standalone business, Rs942 for
JLR business and Rs116/share for investments in
subsidiaries).
Valuation
At the CMP of Rs1,250, the stock is currently trading at 8.3x FY12E consolidated EPS of Rs150 and
7.0x FY13E consolidated EPS of Rs180. We initiate coverage with a BUY and a SOTP-based target
price of Rs1,557 (Rs499 for the standalone business, Rs942 for JLR business and Rs116 for
subsidiaries).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Betting on Evoque
Tata Motors (TAMO) is the largest CV manufacturer in India
with a market share of ~60% each in both the M&HCV and
LCV segments. While the domestic M&HCV business is likely
to moderate, we believe the CV segment’s overall volume
growth would be driven by strong performance from the
LCV segment. During FY11-13E, we expect JLR’s volume
growth and margin profile to remain strong (largely driven
by Land Rover’s high-margin portfolio). We initiate
coverage with a BUY rating and SOTP-based target price of
Rs1,557 (Rs499 for standalone business, Rs942 for JLR
business and Rs116/share for its investments in
subsidiaries).
Evoque to drive JLR volumes: We expect JLR’s volume
growth to be largely driven by launch of Evoque. JLR is
expected to register volume growth of 14%/15% in
FY12E/FY13E compared to 25% in FY11E, largely driven by
the launch of Evoque in Land Rover’s portfolio. We have
factored volumes of 24,000 units and 57,600 units for
Evoque for FY12E/FY13E. We expect JLR to report EBITDA
margins of 14.9%/14.3%/14.2% in FY11E/FY12E/ FY13E
(YTDFY11 EBITDA margin stands at 15.3%) compared to
4.5% in FY10. Strong cash flows will sustain JLR’s planned
annual capex of UK£800-900mn, going forward.
M&HCV (goods) growth to moderate, but LCVs to
remain strong: We expect volume growth to moderate for
the M&HCV segment. Based on outlook for the industry, we
expect TAMO to register volume growth of 10.1%/10.2% in
the M&HCV segment over FY12E/FY13E compared to 23%
in FY11. The LCV segment will continue to remain strong
(volume growth of 19% and 19.4% FY12E/FY13E as
compared to 24% in FY11), largely driven by new product
launches and our positive view on demand scenario for
LCVs. However, market share gains in Passenger Vehicle
segment would remain challenging.
Consolidated debt and cash flow position to remain
strong: Driven by strong profitability and cash generation
from JLR’s operations, the current net automotive
debt/equity stands at 0.8x. This puts TAMO in a very
comfortable position from gearing perspective compared
to the high of 6x in Q2FY10 and 2.1x in Q1FY11.
Valuations and Recommendation: At the CMP of Rs1,250,
the stock is currently trading at 8.3x FY12E consolidated
EPS of Rs150 and 7.0x FY13E consolidated EPS of Rs180. We
initiate coverage with a BUY and a SOTP-based target price
of Rs1,557 (Rs499 for the standalone business, Rs942 for
JLR business and Rs116/share for investments in
subsidiaries).
Valuation
At the CMP of Rs1,250, the stock is currently trading at 8.3x FY12E consolidated EPS of Rs150 and
7.0x FY13E consolidated EPS of Rs180. We initiate coverage with a BUY and a SOTP-based target
price of Rs1,557 (Rs499 for the standalone business, Rs942 for JLR business and Rs116 for
subsidiaries).
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