Tata Motors
Domestic weakness, JLR strong; Hold
Key takeaways
3Q results likely to be good. For 3QFY14, we expect Tata Motors’
consolidated profits to register 90.3% yoy growth, chiefly following the good
performance at JLR. The Indian operations are, however, expected to
continue to be a drag due to the slump in CV sales and lower PV sales. We
expect consolidated sales to grow 31.8% yoy to `607.7bn, with a 15.5%
EBITDA margin and 90.3% yoy profit growth, to `34.3bn.
Standalone numbers to disappoint. Following a sharp volume drop in
3QFY14, on the back of incrementally worse demand environment vis-a-vis
1H, we expect losses to sustain. We expect EBITDA margin at 0.5% and
losses at `6.5bn.
JLR to be the key growth driver. JLR’s 3Q volumes are estimated to have
grown 19.6%. Unlike FY13 however, Jaguar is the key growth driver, not
Land Rover. Backed by good volume growth, we expect JLR to report 32.7%
yoy revenue growth, to £5bn. Our EBITDA margin expectation is 16.6% (up
260bps yoy), with 71.2% growth in profit to £443m (net profit margin of
8.8%, which is up 200bps yoy).
Our take. The cyclical M&H CV slowdown would continue to heap
pressure on Indian operations. Other divisions too are shifting to a lower
trajectory. The demand context for M&H CVs in 1HFY14 has been
challenging. Better performance in the standalone operations is likely only in
FY15. For JLR, good volume growth and continued demand are the clearest
positives at present, with the margin expected to improve ~180bps in FY14.
We currently have a Hold recommendation. Our target is `402, based on
Mar’15 estimates (`362 for JLR, `40 as the value of the India operations and
other investments and subsidiaries). Risks. Downside: Dip in Chinese
demand, negative surprises at JLR; Upside: Better M&H CV and car demand.
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Domestic weakness, JLR strong; Hold
Key takeaways
3Q results likely to be good. For 3QFY14, we expect Tata Motors’
consolidated profits to register 90.3% yoy growth, chiefly following the good
performance at JLR. The Indian operations are, however, expected to
continue to be a drag due to the slump in CV sales and lower PV sales. We
expect consolidated sales to grow 31.8% yoy to `607.7bn, with a 15.5%
EBITDA margin and 90.3% yoy profit growth, to `34.3bn.
Standalone numbers to disappoint. Following a sharp volume drop in
3QFY14, on the back of incrementally worse demand environment vis-a-vis
1H, we expect losses to sustain. We expect EBITDA margin at 0.5% and
losses at `6.5bn.
JLR to be the key growth driver. JLR’s 3Q volumes are estimated to have
grown 19.6%. Unlike FY13 however, Jaguar is the key growth driver, not
Land Rover. Backed by good volume growth, we expect JLR to report 32.7%
yoy revenue growth, to £5bn. Our EBITDA margin expectation is 16.6% (up
260bps yoy), with 71.2% growth in profit to £443m (net profit margin of
8.8%, which is up 200bps yoy).
Our take. The cyclical M&H CV slowdown would continue to heap
pressure on Indian operations. Other divisions too are shifting to a lower
trajectory. The demand context for M&H CVs in 1HFY14 has been
challenging. Better performance in the standalone operations is likely only in
FY15. For JLR, good volume growth and continued demand are the clearest
positives at present, with the margin expected to improve ~180bps in FY14.
We currently have a Hold recommendation. Our target is `402, based on
Mar’15 estimates (`362 for JLR, `40 as the value of the India operations and
other investments and subsidiaries). Risks. Downside: Dip in Chinese
demand, negative surprises at JLR; Upside: Better M&H CV and car demand.
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