Tata Motors reported 3Q PAT of Rs16.3B: Adjusted for forex
charges, PAT was Rs18B (–14% q/q), below our and consensus
estimates. The standalone India business reported a higher-thanexpected
loss of Rs.4.6B, while Jaguar Land Rover’s (JLR) result was
largely in line with expectations, with the EBITDA margin at 14% and
PAT at £296MM (IFRS).
Conference call takeaways: JLR: The growth outlook at JLR remains
healthy, with the New Range Rover receiving an encouraging response.
The Solihull plant (where the Range Rover is manufactured) is now
operating on three shifts. Over FY14E, volume growth should be driven
by new product launches, including the Range Rover, Jaguar F-Type and
the Range Rover Sport. The OEM’s expansion programs, including the
new engine facility, the manufacturing plant in China as well as the
capacity expansion in the UK are on track (for rollout in FY14-15).
Management expects margins to improve in 4Q driven by healthy
volume growth, improved product mix (higher Range Rover) and
favorable currency (GBP/USD). Standalone operations: The India
business is in the midst of an extended downturn, and the near-term
environment is uncertain, particularly for M/HCVs. While an industrylevel
increase in dealer inventory led to Tata Motors’ wholesale market
share in M/HCVs declining to 50%, the retail market share is still ~60%.
While competition in the passenger car segment remains intense, the
environment for LCV’s remains positive – with Tata expanding capacity
in this segment. The domestic margins continue to be impacted by
declining volumes and higher marketing spends.
Price target: We roll forward our price target to Mar-14 and set a
revised PT of Rs330 (based on our sum-of-the-parts valuation). We
believe that the healthy growth outlook at JLR will drive stock price
performance. Key risks: Slower-than-expected growth in key markets,
any increase in discounting trends by global luxury OEMs, and a delayed
revival in the local industrial cycle.
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