Tata Motors - LCVs the only bright spark; Buy - Anand Rathi

Tata Motors reported Nov'12 volumes of 66,500 units, lower 13.4% yoy. While overall performance was below our expectations, LCV sales remained strong and contributed majorly to the company's India sales ytd growth. M&HCVs continue to languish in the midst of a cyclical slowdown, although there is potential for industrial growthled recovery in FY14. We retain Buy on the stock.

- LCVs a key growth driver. Domestic LCV sales remain robust, up 21.5% yoy (marginally down 0.2% mom), driving domestic sales for the company. Ytd growth, at 23.3% yoy, too was robust.

- M&HCVs continue to slide. Domestic M&HCV volume fell 40.9% yoy (21.7% mom) to 9,495 units, continuing the cyclical slowdown, and is likely to remain so in the near term. 3QFY13 could, however, mark the bottom of the cycle.

- Passenger vehicles major drag. Domestic car sales were 42.5% lower yoy, to 13,538 units. Of these, Nano clocked 3,503 units, nearly half yoy. Indica sales were 6,956 units (vs 10,926 last November). Indigo sales also dipped nearly 50% yoy to 3,079 units. YTD sales were 8% lower. UV volumes were decent, up 7.1% yoy to 4,493 units. YTD sales were up 10.5%. The passenger car segment has been a huge disappointment to Tata Motors in Nov '12.

- Export run-rate decent. Exports were 4,146 units, down 4.7% yoy (up 14.3% mom). YTD exports were 35,521 units, down 10.3% yoy.

- Valuation. We rate the stock Buy, with price target of Rs.337 (Rs.274 as the value of JLR, Rs.35 as the value of the standalone entity and Rs.32 as the value of other subsidiaries and investments. Risks. Currency fluctuation, European economic downturn, negative surprises at JLR.

Source : Equity Bulls

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