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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RECO : BUY TP : Rs 1,520
Investment Rationale
§ JLR continues to surprise on volumes and profitability. Increasingly Tata Motors’ performance is leveraged to
JLR. JLR’s profitability is very sensitive to volumes. 1% swing in volumes impacts EBIDTA by 1.3%.
§ JLR 3QFY11 EBIDTA margins (before product development) margins of >17% seems to have peaked. However,
there are adequate lever available to ensure that margins are in the vicinity of 16%.
§ We have been expecting that M&HCV demand in India to enter into a cyclical slowdown phase. However, we
are positively surprised by recent (October 2010 to February 2011) strong show by M&HCV goods.
§ While we maintain our FY12 volume estimates ot 7% to 8% tonnage growth, the recent set of data indicates that
there could be positive surprises in store.
§ While raw material cost pressures continue to be a concern, high consolidated margins will have lower impact on
EBIDTA as compared to other players within the auto space
§ The biggest risks arises fropm the geo political tension in the middle east as this could have an adverse impact
on oil price which in turn can impact the demand for JLR
Valuations
§ We have valued the stock on SOTP basis. We have valued the standalone company, JLR and other subsidiaries
at a target EV/EBIDTA of 8x, 5x and 10% disc to standalone, respectively. We have valued the company at Rs
1520(based on FY12 estimates)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RECO : BUY TP : Rs 1,520
Investment Rationale
§ JLR continues to surprise on volumes and profitability. Increasingly Tata Motors’ performance is leveraged to
JLR. JLR’s profitability is very sensitive to volumes. 1% swing in volumes impacts EBIDTA by 1.3%.
§ JLR 3QFY11 EBIDTA margins (before product development) margins of >17% seems to have peaked. However,
there are adequate lever available to ensure that margins are in the vicinity of 16%.
§ We have been expecting that M&HCV demand in India to enter into a cyclical slowdown phase. However, we
are positively surprised by recent (October 2010 to February 2011) strong show by M&HCV goods.
§ While we maintain our FY12 volume estimates ot 7% to 8% tonnage growth, the recent set of data indicates that
there could be positive surprises in store.
§ While raw material cost pressures continue to be a concern, high consolidated margins will have lower impact on
EBIDTA as compared to other players within the auto space
§ The biggest risks arises fropm the geo political tension in the middle east as this could have an adverse impact
on oil price which in turn can impact the demand for JLR
Valuations
§ We have valued the stock on SOTP basis. We have valued the standalone company, JLR and other subsidiaries
at a target EV/EBIDTA of 8x, 5x and 10% disc to standalone, respectively. We have valued the company at Rs
1520(based on FY12 estimates)
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