Tata Motors - 4QFY2012 Result Update - Angel Broking

Consolidated performance a mixed bag: TTMT's consolidated top line registered impressive 44.3% yoy (12.5% qoq) growth to Rs.50,908cr, aided by 51.5% yoy (10.6% qoq) growth in JLR sales, which were driven by a 48.2% yoy (13.6% qoq) jump in volumes. The company's operating margin declined by 184bp qoq and stood at 13.2%, as EBITDA margin at JLR declined by 240bp qoq to 14.6% on account of currency fluctuations, adverse mix impact (higher Evoque and Freelander sales) and higher employee expenses. Reported PAT at Rs.6,234cr benefitted from tax credits of Rs.1,826cr during the quarter.

Strong standalone performance: TTMT's standalone top line grew by healthy 14.4% yoy (22.9% qoq) to Rs.16,391cr, driven by 18.5% yoy (23.3% qoq) growth in volumes. Net average realization, however, declined by 3.6% yoy due to higher proportion of passenger cars in the total volume mix. Operating margin improved substantially by 268bp qoq to 9.1%, driven by higher operating leverage, lower staff costs and reduction in marketing expenses. Led by strong operating performance and lower tax rate, adjusted PAT increased by 19% yoy to Rs.775cr. Reported net profit declined by 1.4% yoy to Rs.565cr due to net MTM forex loss of Rs.80cr and Rs.130cr provision for loans given to its subsidiary.

Outlook and valuation: While we broadly retain our volume and revenue assumptions for standalone and JLR operations for FY2013E/14E, we lower our EBITDA margin estimates for JLR to factor in higher margin pressures due to increasing contribution from the base version of Evoque and higher marketing spends. Nonetheless, we remain positive on the stock as we expect volume momentum at JLR to continue. At Rs.243, the stock is trading at 5.6x FY2014E earnings. Due to the recent correction in the stock price, we recommend Buy on the stock with an SOTP target price of Rs.299.

Source : Equity Bulls

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