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Tata Motors (TTMT) Q2FY12 performance was mixed bag where domestic
performance disappointed while JLR was ahead of expectations mainly
on sales being higher than expectations. Adjusted PAT at INR23bn (up
11% YoY) was 16%/11% ahead of ours/consensus expectations. We
disliked it for: (1) it being FCF negative on both standalone and
consolidated, (2) increase in capitalization despite a drop in capex, (3)
sequential low margins in JLR in spite of having the benefit of operating
leverage and forex and (4) exceptionally low and non sustainable other
expenditure to sales ratio. On the positive side, JLR sales performance
has been much stronger than what we had anticipated in the face of
tough macro conditions. We raise our FY12/13 EBITDA by +13%/0.3% to
factor in strong sales performance by JLR and weak standalone numbers.
We maintain Hold as in our view strong volume growth momentum from
new launches is the key positive trigger while poor macro condition
would cap upside. Adjust TP to INR174.
JLR sales traction strong despite macro headwinds
Notwithstanding recession like economic conditions in the Europe and slowdown in the
US, JLR continues to post strong sales performance mainly due to new launches namely
Evoque and strong demand from China. Sales ramp up of Evoque should ensure
volume visibility for the next two quarters.
Domestic performance, margins disappoint
Despite the product mix improvement, domestic business EBITDA margins declined to
7.2% due to losses in car business. It coupled with capex and deteriorating working
capital implies that TTMT posted negative FCF for Q2 which offset meager positive FCF
of JLR. Other disappointment was sequential margin pressure on consolidated
financials despite recording very low other expenditure and favorable forex movement
for JLR.
Outlook and valuations: Balanced; maintain ‘HOLD’
Risk–rewards are balanced given the new product launches as positive triggers and
deteriorating macro environment as a negative trigger. We maintain ‘Hold/SP’
recommendation/rating on the stock. We adjust our SOTP to INR 174 from INR 166.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Motors (TTMT) Q2FY12 performance was mixed bag where domestic
performance disappointed while JLR was ahead of expectations mainly
on sales being higher than expectations. Adjusted PAT at INR23bn (up
11% YoY) was 16%/11% ahead of ours/consensus expectations. We
disliked it for: (1) it being FCF negative on both standalone and
consolidated, (2) increase in capitalization despite a drop in capex, (3)
sequential low margins in JLR in spite of having the benefit of operating
leverage and forex and (4) exceptionally low and non sustainable other
expenditure to sales ratio. On the positive side, JLR sales performance
has been much stronger than what we had anticipated in the face of
tough macro conditions. We raise our FY12/13 EBITDA by +13%/0.3% to
factor in strong sales performance by JLR and weak standalone numbers.
We maintain Hold as in our view strong volume growth momentum from
new launches is the key positive trigger while poor macro condition
would cap upside. Adjust TP to INR174.
JLR sales traction strong despite macro headwinds
Notwithstanding recession like economic conditions in the Europe and slowdown in the
US, JLR continues to post strong sales performance mainly due to new launches namely
Evoque and strong demand from China. Sales ramp up of Evoque should ensure
volume visibility for the next two quarters.
Domestic performance, margins disappoint
Despite the product mix improvement, domestic business EBITDA margins declined to
7.2% due to losses in car business. It coupled with capex and deteriorating working
capital implies that TTMT posted negative FCF for Q2 which offset meager positive FCF
of JLR. Other disappointment was sequential margin pressure on consolidated
financials despite recording very low other expenditure and favorable forex movement
for JLR.
Outlook and valuations: Balanced; maintain ‘HOLD’
Risk–rewards are balanced given the new product launches as positive triggers and
deteriorating macro environment as a negative trigger. We maintain ‘Hold/SP’
recommendation/rating on the stock. We adjust our SOTP to INR 174 from INR 166.
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