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1Q consolidated PAT at Rs.19.9B (flat yoy) was below ours and
consensus estimates driven by margin pressures both at JLR and the
India business. Standalone EBITDA margins at 8.4% (-40bp qoq)
declined given a sharp increase in other expense ratio (+210bp qoq) on
higher marketing spend. JLR’s EBITDA margin at 15.1% (-40bp yoy
and -70bp qoq) declined given the adverse impact of currency
movements (forex loss of GBP30m, given the strengthening of the GBP
vs the USD).
Jaguar Land Rover Results: Revenues at GBP 2.7B (up 20% yoy) were
aided by sharp expansion in realizations (+6% qoq) given rising sales in
China. However, EBITDA margins declined as highlighted above on
adverse currency movements. Further, interest costs were higher related
to pre-payment expenses on the EIB loan. Tax rates also increased to
11.9% (+6309bp qoq) on higher payments at the Chinese sales company.
Thus, PAT at GBP 219m declined -1% yoy.
Conference Call takeaways: Volume Outlook: Management
highlighted that sales growth at JLR will be driven by the Chinese
market (volumes of 40,000 units +60% yoy), the launch of the Evoque
(pre bookings of 18,000 units) as well as the roll out of the XF with the
2.2L diesel engine. This will partially mitigate the moderating growth
outlook in the developed markets. On the domestic business, growth will
be driven by LCV's; further a likely pick up in economic activity in 2H
will drive growth in the M/HCV segment. However, the environment for
the passenger car segment remains challenging. Margin Outlook: The
management expects the margins to remain under pressure as i) the
Evoque is a lower margin product (given lower price points) ii) an
uncertain external environment iii) currency fluctuations iv) growth
pressures in the domestic segment - particularly in the passenger car
segment. Cash Flows: JLR generated a healthy free cash flow of GBP
114m in 1Q. The OEM incurred a capex of GBP370m (in line with
management's guidance of GBP1.5B expenditure program over FY12E).
Tata Motors has net automotive debt of Rs145Bn, of which Rs.137Bn is
in the standalone entity.
Our View: While the global growth outlook appears challenging, given
the economic uncertainties in US / Europe, the stock price has corrected
sharply on the back of the US credit ratings cut. We are currently
reviewing our model in light of the results.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
1Q consolidated PAT at Rs.19.9B (flat yoy) was below ours and
consensus estimates driven by margin pressures both at JLR and the
India business. Standalone EBITDA margins at 8.4% (-40bp qoq)
declined given a sharp increase in other expense ratio (+210bp qoq) on
higher marketing spend. JLR’s EBITDA margin at 15.1% (-40bp yoy
and -70bp qoq) declined given the adverse impact of currency
movements (forex loss of GBP30m, given the strengthening of the GBP
vs the USD).
Jaguar Land Rover Results: Revenues at GBP 2.7B (up 20% yoy) were
aided by sharp expansion in realizations (+6% qoq) given rising sales in
China. However, EBITDA margins declined as highlighted above on
adverse currency movements. Further, interest costs were higher related
to pre-payment expenses on the EIB loan. Tax rates also increased to
11.9% (+6309bp qoq) on higher payments at the Chinese sales company.
Thus, PAT at GBP 219m declined -1% yoy.
Conference Call takeaways: Volume Outlook: Management
highlighted that sales growth at JLR will be driven by the Chinese
market (volumes of 40,000 units +60% yoy), the launch of the Evoque
(pre bookings of 18,000 units) as well as the roll out of the XF with the
2.2L diesel engine. This will partially mitigate the moderating growth
outlook in the developed markets. On the domestic business, growth will
be driven by LCV's; further a likely pick up in economic activity in 2H
will drive growth in the M/HCV segment. However, the environment for
the passenger car segment remains challenging. Margin Outlook: The
management expects the margins to remain under pressure as i) the
Evoque is a lower margin product (given lower price points) ii) an
uncertain external environment iii) currency fluctuations iv) growth
pressures in the domestic segment - particularly in the passenger car
segment. Cash Flows: JLR generated a healthy free cash flow of GBP
114m in 1Q. The OEM incurred a capex of GBP370m (in line with
management's guidance of GBP1.5B expenditure program over FY12E).
Tata Motors has net automotive debt of Rs145Bn, of which Rs.137Bn is
in the standalone entity.
Our View: While the global growth outlook appears challenging, given
the economic uncertainties in US / Europe, the stock price has corrected
sharply on the back of the US credit ratings cut. We are currently
reviewing our model in light of the results.
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