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Forex loss eclipses healthy operating performance: For 2QFY2012, Tata Motors’
(TTMT) consolidated net profit declined by 15.5% yoy (6.1% qoq) on account of
MTM loss of `439cr on foreign currency loans. Top-line growth of 25.8% yoy
(7.8% qoq) came in slightly better than our expectation, aided by strong 30.3%
yoy (8% qoq) growth in JLR’s revenue. Operating margin contracted by 146bp
yoy (flat qoq) to 12.4% due to raw-material cost pressures in domestic and JLR
operations and unfavorable forex movement. Going ahead, management expects
margins in both the businesses to remain under pressure, led by higher
raw-material costs.
Standalone operating performance under stress: TTMT posted in-line growth of
15.2% yoy (8.9% qoq) in its top line, driven by 4% yoy (6.9% qoq) growth in
volumes and 8.2% yoy (1.8% qoq) growth in net average realization. Operating
margin pressures continued during the quarter due to higher raw-material prices,
lower operating leverage and higher marketing expenses in the passenger vehicle
business. Thus, OPM declined significantly by 299bp yoy (139bp qoq) to 6.7%.
Net profit fell by 76.4% yoy (74.6% qoq), led by weak operating performance and
MTM loss of `294cr; however, tax credit of `66cr benefitted the bottom line.
Outlook and valuation: We broadly retain our estimates for JLR, as we believe
strong volume traction witnessed in emerging markets and successful launch of
new models will help sustain JLR’s performance. However, we have lowered our
standalone earnings estimates to `4.3/`6.8 for FY2012E/13E to factor in the
weak domestic volume performance and continued margin pressures. As a result,
consolidated earnings estimates have been revised down by 4.3%/4.0% for
FY2012/13E. At `181, the stock is trading at 6.1x FY2013E earnings.
We recommend Neutral on the stock owing to a limited upside of 3.3% (fair value
of `187) from current levels.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Forex loss eclipses healthy operating performance: For 2QFY2012, Tata Motors’
(TTMT) consolidated net profit declined by 15.5% yoy (6.1% qoq) on account of
MTM loss of `439cr on foreign currency loans. Top-line growth of 25.8% yoy
(7.8% qoq) came in slightly better than our expectation, aided by strong 30.3%
yoy (8% qoq) growth in JLR’s revenue. Operating margin contracted by 146bp
yoy (flat qoq) to 12.4% due to raw-material cost pressures in domestic and JLR
operations and unfavorable forex movement. Going ahead, management expects
margins in both the businesses to remain under pressure, led by higher
raw-material costs.
Standalone operating performance under stress: TTMT posted in-line growth of
15.2% yoy (8.9% qoq) in its top line, driven by 4% yoy (6.9% qoq) growth in
volumes and 8.2% yoy (1.8% qoq) growth in net average realization. Operating
margin pressures continued during the quarter due to higher raw-material prices,
lower operating leverage and higher marketing expenses in the passenger vehicle
business. Thus, OPM declined significantly by 299bp yoy (139bp qoq) to 6.7%.
Net profit fell by 76.4% yoy (74.6% qoq), led by weak operating performance and
MTM loss of `294cr; however, tax credit of `66cr benefitted the bottom line.
Outlook and valuation: We broadly retain our estimates for JLR, as we believe
strong volume traction witnessed in emerging markets and successful launch of
new models will help sustain JLR’s performance. However, we have lowered our
standalone earnings estimates to `4.3/`6.8 for FY2012E/13E to factor in the
weak domestic volume performance and continued margin pressures. As a result,
consolidated earnings estimates have been revised down by 4.3%/4.0% for
FY2012/13E. At `181, the stock is trading at 6.1x FY2013E earnings.
We recommend Neutral on the stock owing to a limited upside of 3.3% (fair value
of `187) from current levels.
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