Tata Motors - JLR beats estimates though standalone continues to disappoint :LKP

Consol results above estimates on JLR beat

Tata Motors consolidated sales were up by 10.3% yoy, and 21.9% qoq in Q4 FY13, majorly led by strong sales of JLR.  JLR volumes grew by 19% yoy and 22.7% qoq to 116,340 units, while JLR EBITDA margins escalated to 16.9%, almost a 300 bps improvement sequentially. Evoque along with new Jaguar XF and the new Range Rover pulled up a solid show which helped the company to post better than expected results. Better pricing stemming from favorable product mix, improved geographical distribution and currency gains led to strong realizations and margins. Also lower RM to cost at JLR (60.8% v/s 63.3% qoq and 64.4% yoy) led to outperformance at the margin levels.  Standalone sales were up by just 4% qoq, while down by 33% qoq. Slowdown in MHCV sales and underperformance of the PV segment led to the sequential fall. The standalone EBITDA margins slipped to 2% from 9.1% yoy, but were still better than 1.4% qoq. The company lost significant market share on the PV side to about 8.5% from 13% over a period. On the CV side, LCV segment was the main driver of growth, while MHCV segment continued its dismal performance, though the market share in this segment improved.  Consolidated margins came in at 14% as JLR was the sole driver of growth. Net profits at the consol level zoomed up to Rs39.5 bn, though it was 38% down yoy on a tax credit last year. These numbers beat the markets estimates quite handsomely on JLR outperformance.

Outlook and valuation

The company is expected to perform well on the JLR front which is the chunk of their business. Improvement in margins has reduced the fears of margin weakness and new launches will take care of the volume performance. Emerging geographies like South America, China, Russia etc. are expected to drive the revenues going forward. We expect some revival in the domestic MHCV business on economic recovery in the second half of the year.  LCV segment is still going strong and new launches within PV segment to arrest the decline in the market share of cars. We now roll over the estimates to FY 15, thus increasing the stock target to Rs379 from earlier target of Rs362. Maintain BUY.

LKP Research

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