Tata Motors:: Results in line at operating level:: Nomura Research

Results in line at operating level
JLR's positives offset by weak
domestic business

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Maintain Neutral; TP revised to INR284
TTMT’s adj PAT of INR20.8bn was below our INR26bn estimate and
consensus of INR23.8bn. However, EBITDA at INR53.3bn was in line with
our estimates. Margins for JLR surprised positively, while that for the
stand-alone business came in below estimates. We think the bulk of JLR’s
gross margin improvement may have come from currency movements.
We have tweaked up our estimate for JLR and reduced estimates for the
stand-alone business to factor in a weaker MHCV outlook in FY13F.
Overall our EPS estimates are down by 2.5% for FY13F and up by 5% in
FY14F as we factor in better-than-expected margins at JLR. Management
continues to remain cautiously optimistic on JLR's outlook.
Catalysts: Success of new models (positive); weaker USD, slowdown
in China and domestic trucks (negative)
 Stronger-than-expected volumes for new launches could present
potential upside risks.
 A slowdown in China or further slowdown in Domestic MHCVs could be
a potential downside risk.
 Weakening USD could reverse currency gains seen in Q2FY13.
Valuation: SOTP-based TP raised to INR284
We increase our TP by c.9% due as we roll forward to average EBITDA of
FY14 and FY15 (from FY14F earlier). We value the stand-alone business
at INR51.8/sh, based on 7.0x EBITDA of INR45,815mn. We value JLR at
INR201.6/sh, based on 3.0x normalized EBITDA of INR239,206mn. We
value other investments at INR30.5/sh.