Tata Motors - 1QFY2013 Result Update - Angel Broking

In-line operating performance, bottom-line lower-than-expected on high tax rate: For 1QFY2013, Tata Motors (TTMT)' consolidated top-line registered a strong 30.1% yoy (down 14.9% qoq) growth aided by 57% yoy growth in Jaguar - Land Rover (JLR) revenues. JLR results were driven by a robust 34.4% yoy growth in volumes led by Evoque (27,207 units) and strong demand in China (volumes up 91% yoy). The EBITDA margin remained stable sequentially at 13.3% due to stable operating performance at JLR (EBITDA margin at 14.5%), which benefitted from richer geography mix and favorable forex. The adjusted net profit increased by a strong 30.6% yoy (down 27.3% qoq), but it was 11.3% below our estimates, due to high tax rate on recognition of deferred tax assets in 4QFY2012.

Weak standalone performance: TTMT posted weak standalone results due to a weak product-mix and competitive pressures in the passenger vehicles (PV) business. The-top line declined 8.9% yoy (35.4% qoq) led by a 2.1% yoy (32.6% qoq) and 7.1% yoy (4.3% qoq) decline in volume and net average realization respectively. The EBITDA margin continued to be under pressure and declined by 171bp yoy (246bp qoq) to 6.6%, led by increase in staff cost (140bp yoy) and higher marketing spends. Hence, the adjusted net profit fell by 8.2% yoy to Rs.366cr.

Outlook and valuation: We continue to maintain our positive outlook on JLR and expect volume momentum to sustain going ahead led by Evoque and Jaguar XF and strong demand in China and other emerging markets. Further the introduction of the new Range Rover will further lend momentum to the volume growth. At Rs.239, the stock is trading attractively at 5.5x and 2.9x FY2014E earnings and EV/EBITDA respectively. We maintain our Buy rating on the stock with a sum-of-the-parts (SOTP) target price of Rs.292.

Source : Equity Bulls

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