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H a s r e c e s s i o n c o m e ? N o … S o r e m a i n p o s i t i v e
Tata Motors (TML) reported numbers slightly below our expectations as
stronger cost pressures in the domestic business and forex impact on
JLR caused the variance. Consolidated topline came above our estimates
at ~| 33,393 crore (I-direct estimate: ~| 32,850 crore) (up 24.2% YoY) as
JLR’s topline grew to £2712 million (up 19.9% YoY) and standalone
business grew to ~| 11,898 crore (up 14.2% YoY). Consolidated EBITDA
margin was below our estimates at 13.3% (I-direct estimate: 13.8%). This
was mainly due to higher input costs pressures along with rise in
marketing and distribution expenses that led to a decline in standalone
margins (down 40 bps QoQ at 8.4%). The price hikes (~2-2.5%) in the
domestic market were insufficient to compensate for the same. However,
JLR witnessed a stronger-than-expected margins drop (80 bps QoQ at
15.1%) as unfavourable forex movement (net ~£30 million) ate into ~50-
70 bps of margins. On the PAT front, the consolidated number was at |
1988.8 crore (I-direct estimate: | 2295.6 crore) as JLR’s profit came lower
at £218.9 million due to higher taxes at JLR NSC’s in other countries even
as standalone profits came in line with our expectations at ~| 402 crore.
Highlights of the quarter
On the domestic front, the LCV segment continues to lead volume growth
with CV segment performing better than industry. However, the PV
segment sales pressure has been concerning. TML has increased its
marketing push along with product developments to reverse the situation.
JLR has continued to perform well with ASPs rise of ~2.3% QoQ, 11.9%
YoY with richer sales mix from profitable emerging markets. New model
year 12 (MY12) launches led by 2.2 litre diesel-XF along with LR-Evoque
are expected to provide strong volume traction post H2FY12E.
V a l u a t i o n
We believe the recent stock price correction is an over reaction to the
western concerns of a recession. The market continues to oversee the
strong possibility of growth in the JLR business considering the strongest
product profile in terms of refreshments expected out of JLR among its
peers. We have factored in major negatives in business growth and
assigned trough valuations to arrive at a target price of | 1,226. We
maintain our STRONG BUY rating. Investors who had entered the stock at
higher price points can make fresh staggered entry at these levels
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
H a s r e c e s s i o n c o m e ? N o … S o r e m a i n p o s i t i v e
Tata Motors (TML) reported numbers slightly below our expectations as
stronger cost pressures in the domestic business and forex impact on
JLR caused the variance. Consolidated topline came above our estimates
at ~| 33,393 crore (I-direct estimate: ~| 32,850 crore) (up 24.2% YoY) as
JLR’s topline grew to £2712 million (up 19.9% YoY) and standalone
business grew to ~| 11,898 crore (up 14.2% YoY). Consolidated EBITDA
margin was below our estimates at 13.3% (I-direct estimate: 13.8%). This
was mainly due to higher input costs pressures along with rise in
marketing and distribution expenses that led to a decline in standalone
margins (down 40 bps QoQ at 8.4%). The price hikes (~2-2.5%) in the
domestic market were insufficient to compensate for the same. However,
JLR witnessed a stronger-than-expected margins drop (80 bps QoQ at
15.1%) as unfavourable forex movement (net ~£30 million) ate into ~50-
70 bps of margins. On the PAT front, the consolidated number was at |
1988.8 crore (I-direct estimate: | 2295.6 crore) as JLR’s profit came lower
at £218.9 million due to higher taxes at JLR NSC’s in other countries even
as standalone profits came in line with our expectations at ~| 402 crore.
Highlights of the quarter
On the domestic front, the LCV segment continues to lead volume growth
with CV segment performing better than industry. However, the PV
segment sales pressure has been concerning. TML has increased its
marketing push along with product developments to reverse the situation.
JLR has continued to perform well with ASPs rise of ~2.3% QoQ, 11.9%
YoY with richer sales mix from profitable emerging markets. New model
year 12 (MY12) launches led by 2.2 litre diesel-XF along with LR-Evoque
are expected to provide strong volume traction post H2FY12E.
V a l u a t i o n
We believe the recent stock price correction is an over reaction to the
western concerns of a recession. The market continues to oversee the
strong possibility of growth in the JLR business considering the strongest
product profile in terms of refreshments expected out of JLR among its
peers. We have factored in major negatives in business growth and
assigned trough valuations to arrive at a target price of | 1,226. We
maintain our STRONG BUY rating. Investors who had entered the stock at
higher price points can make fresh staggered entry at these levels
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