JLR momentum to remain strong – BUY
We state a BUY on TTMT with a TP of Rs 320 (upside 13%). JLR’s volume growth momentum is likely to continue in the next two years propped by new launches and growing strength in the China market (dealership to rise to 130 by year end from 100 currently), in our view. Also, the domestic CV market is close to its bottom – we see a revival in the next two years as rate cycle turns and favourable base effect comes into play. We expect revenue/PAT CAGR to be 15%/18% in FY13E-FY15E. Accumulate on dips.
JLR margin surprises; standalone muted: TTMT’s Q2FY12 consolidated adj. PAT at Rs 20.8bn came in lower than estimates. JLR’s EBITDA margin surprised at 14.8% (14.2% YoY/14.5% QoQ) on superior product and geography mix aided by a favourable forex movement. The standalone performance was muted with margin at 5.9% (vs. 7.2% YoY/7.3% QoQ), while dividend income (from JLR) boosted PAT.
JLR to drive growth: We believe JLR would continue to show a strong growth in H2FY13 and drive TTMT’s consolidated results on new launches – New Range Rover (in Q3), F-Type and Sportsbrake in 2013. Further, the Chinese market continues to show strong growth and with the rise in dealership to 130 by year end will pick pace. We have built in 358,000/394,000/447,000 volumes for JLR in FY13/FY14/FY15. We believe the domestic CV cycle is bottoming out and expect a revival in the next 3-6 months with interest rate cuts, pre-election spending and favourable base for FY14. We have built in a 9%-10% growth in domestic volumes (CV and passenger vehicles) in FY14E/FY15E.
BUY with a TP of Rs 320: We expect revenue/PAT CAGR to be 15%/18% in FY13E-FY15E. We have valued TTMT on SoTP – standalone at 7.5x EV/EBITDA one year forward (Rs 76), JLR 3.5x EV/EBITDA one year forward (Rs 209). Including the value of other subsidiaries (Rs 35), our TP is Rs 320 (upside 13%). Recommend BUY. In our view, accumulate on dips as the stock is likely to outperform in the medium term.
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