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Tata Motors (TTMT)
Automobiles
In-line results. Tata Motors consolidated profit after tax of Rs20.4 bn (flat yoy, -18%
qoq) - in line with our estimates as the poor performance of standalone operations was
offset by slightly better-than-expected JLR performance. Standalone performance was
impacted by higher other expenses while JLR performance was slightly better due to a
higher share of China volumes in the product mix. We maintain our REDUCE rating as
we believe profitability will remain under pressure.
Sharp increase in JLR revenues surprised while EBITDA margins remained under pressure
Standalone 1QFY12 revenues of Rs119 bn (+14% yoy, -19% qoq) were 3% below our
estimates and EBITDA of Rs9.1 bn (-22% yoy, -27% qoq) was 15% below our estimates. Gross
average selling prices were flat qoq due to higher share of light commercial vehicle sales in the
product mix. Volumes declined by 18% qoq driven by 22% qoq decline in MHCV volumes and
33% qoq decline in passenger vehicle volumes.
Raw material costs as a proportion of sales declined by 270 bps during the quarter due to richer
product mix (higher share of light commercial vehicle volumes). Other expenses and staff costs
were 11-14% higher than our estimate due to higher marketing and sales promotion expenses
coupled with wage inflation. EBITDA margins declined by 90 bps qoq due to higher staff costs
and other expenses which offset the improvement in gross margins.
JLR reported a GBP221 mn profit in 1QFY12, in line with our estimates. Net sales of GBP2.71
bn was 8% higher than our estimates due to a 6% qoq improvement in realization, positively
impacted by higher share of China sales in the product mix. EBITDA of GBP408 mn was 6%
above our estimates. Higher product development expenses, interest expenses and a higher tax
rate in the quarter offset the better-than-expected operational performance.
We maintain our REDUCE rating and cut our target price to Rs930 (from 1,060 earlier)
We have revised our standalone earnings downwards by 5-6% over FY2012-2013E due to a 2%
further cut in our passenger car volumes and slight cut in margins due to higher other expenses.
We have cut earnings by 5-9% over FY2012-2013, factoring in a 70-80 bps decline in margins as
we expect incentives to increase further and lower-margin products like Evoque and XF 2.2 litre
engine model would impact EBITDA margins. Our SOTP-based target price has been revised
downwards to Rs930 (from Rs1,060 earlier).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Motors (TTMT)
Automobiles
In-line results. Tata Motors consolidated profit after tax of Rs20.4 bn (flat yoy, -18%
qoq) - in line with our estimates as the poor performance of standalone operations was
offset by slightly better-than-expected JLR performance. Standalone performance was
impacted by higher other expenses while JLR performance was slightly better due to a
higher share of China volumes in the product mix. We maintain our REDUCE rating as
we believe profitability will remain under pressure.
Sharp increase in JLR revenues surprised while EBITDA margins remained under pressure
Standalone 1QFY12 revenues of Rs119 bn (+14% yoy, -19% qoq) were 3% below our
estimates and EBITDA of Rs9.1 bn (-22% yoy, -27% qoq) was 15% below our estimates. Gross
average selling prices were flat qoq due to higher share of light commercial vehicle sales in the
product mix. Volumes declined by 18% qoq driven by 22% qoq decline in MHCV volumes and
33% qoq decline in passenger vehicle volumes.
Raw material costs as a proportion of sales declined by 270 bps during the quarter due to richer
product mix (higher share of light commercial vehicle volumes). Other expenses and staff costs
were 11-14% higher than our estimate due to higher marketing and sales promotion expenses
coupled with wage inflation. EBITDA margins declined by 90 bps qoq due to higher staff costs
and other expenses which offset the improvement in gross margins.
JLR reported a GBP221 mn profit in 1QFY12, in line with our estimates. Net sales of GBP2.71
bn was 8% higher than our estimates due to a 6% qoq improvement in realization, positively
impacted by higher share of China sales in the product mix. EBITDA of GBP408 mn was 6%
above our estimates. Higher product development expenses, interest expenses and a higher tax
rate in the quarter offset the better-than-expected operational performance.
We maintain our REDUCE rating and cut our target price to Rs930 (from 1,060 earlier)
We have revised our standalone earnings downwards by 5-6% over FY2012-2013E due to a 2%
further cut in our passenger car volumes and slight cut in margins due to higher other expenses.
We have cut earnings by 5-9% over FY2012-2013, factoring in a 70-80 bps decline in margins as
we expect incentives to increase further and lower-margin products like Evoque and XF 2.2 litre
engine model would impact EBITDA margins. Our SOTP-based target price has been revised
downwards to Rs930 (from Rs1,060 earlier).
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