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Tata Motors (TAMO.BO)
2QFY12 – Some Hits, Some Misses
Domestic results disappointed — With parent reported PAT of ~Rs1bn. Adjusted for
the FX losses (~Rs2.9bn), PAT was above estimates. The quality of earnings
disappointed though, as the beat was driven by lower interest expense / tax write back.
At the operating level, EBITDA was Rs9.33bn (7.2%, down 120bps Y/Y), missing
estimates by 7%. We reckon a mix of cost pressures, heightened marketing spends on
the car business and deteriorating pricing in the car business impacted margins.
Ahead, we expect some sequential improvement in margins given rebound in retail
volumes of the Nano, but believe the near-term environment will remain very
challenging both from a competitive perspective and a volume growth perspective.
JLR's operating results were in line — with EBITDA of £437m (~15%). PAT of
£238m was 9% below estimates – reflecting higher tax levels in the NSCs. ASPs were
~£43,000/vehicle – down 1.5% Q/Q – reflecting Fx headwinds, despite a rich product/
market mix. Fx impacted EBITDA margins by ~1.3%.
Conference call takeaways — Mgmt sounded a bit cautious on the domestic
business, noted that initiatives on dealer networks, marketing and publicity will continue
to drag down domestic EBITDA margins. We thought JLR mgmt sounded more
optimistic – no volume guidance provided, but Evoque bookings now at ~30k (20k
earlier). Mgmt noted that J volumes have begun to recover, post the launch of the new
2.2l XF, while LR volumes remain strong. Capex reaffirmed at £1.5bn over FY12.
Freelander volumes’ supply impacted due to Evoque’s production ramp-up.
Balance sheet – debt levels remain high — Gross debt was Rs439bn – up from
Rs328bn end FY11. Cash balances remain healthy – net auto debt of Rs160bn end 2Q
vs. Rs13.1bn end FY11. Mgmt is attempting to dollarize debt, replacing high cost INR
debt with lower cost Fx debt.
Paring estimates — We cut EBITDA forecasts for FY12 -14 for parent (no changes to
JLR forecasts) – by 5-10% – reflecting marketing spends / cost pressures. Maintain
Buy; value TTMT on SOTP – Rs 111 / 87 per share for parent / JLR respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Motors (TAMO.BO)
2QFY12 – Some Hits, Some Misses
Domestic results disappointed — With parent reported PAT of ~Rs1bn. Adjusted for
the FX losses (~Rs2.9bn), PAT was above estimates. The quality of earnings
disappointed though, as the beat was driven by lower interest expense / tax write back.
At the operating level, EBITDA was Rs9.33bn (7.2%, down 120bps Y/Y), missing
estimates by 7%. We reckon a mix of cost pressures, heightened marketing spends on
the car business and deteriorating pricing in the car business impacted margins.
Ahead, we expect some sequential improvement in margins given rebound in retail
volumes of the Nano, but believe the near-term environment will remain very
challenging both from a competitive perspective and a volume growth perspective.
JLR's operating results were in line — with EBITDA of £437m (~15%). PAT of
£238m was 9% below estimates – reflecting higher tax levels in the NSCs. ASPs were
~£43,000/vehicle – down 1.5% Q/Q – reflecting Fx headwinds, despite a rich product/
market mix. Fx impacted EBITDA margins by ~1.3%.
Conference call takeaways — Mgmt sounded a bit cautious on the domestic
business, noted that initiatives on dealer networks, marketing and publicity will continue
to drag down domestic EBITDA margins. We thought JLR mgmt sounded more
optimistic – no volume guidance provided, but Evoque bookings now at ~30k (20k
earlier). Mgmt noted that J volumes have begun to recover, post the launch of the new
2.2l XF, while LR volumes remain strong. Capex reaffirmed at £1.5bn over FY12.
Freelander volumes’ supply impacted due to Evoque’s production ramp-up.
Balance sheet – debt levels remain high — Gross debt was Rs439bn – up from
Rs328bn end FY11. Cash balances remain healthy – net auto debt of Rs160bn end 2Q
vs. Rs13.1bn end FY11. Mgmt is attempting to dollarize debt, replacing high cost INR
debt with lower cost Fx debt.
Paring estimates — We cut EBITDA forecasts for FY12 -14 for parent (no changes to
JLR forecasts) – by 5-10% – reflecting marketing spends / cost pressures. Maintain
Buy; value TTMT on SOTP – Rs 111 / 87 per share for parent / JLR respectively.
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