Tata Motors - 3QFY2013 Result Review - Angel Broking

Tata Motors (CMP: Rs. 297/ TP: -/ Upside: -)

For 3QFY2013, Tata Motors (TTMT) bottom-line performance was significantly lower-than-expected led by higher depreciation expense (up 29.8% qoq), forex loss of Rs. 174cr and higher tax rate (at 38.7% as against 32% in 2QFY2013). The top-line performance too was lower-than-expected due to unfavorable product-mix at Jaguar and Land Rover (JLR) and standalone operations which resulted in a sequential decline in net average realization. The standalone operations posted a loss (adjusted) of Rs. 450cr, against our expectations of a loss of Rs. 25cr, primarily on account of dismal operating performance (EBITDA margins deteriorated to 1.4% on higher discounts and marketing spends in the passenger vehicle and medium and heavy commercial vehicle business and lower utilization levels).

The consolidated top-line registered a modest sequential growth of 6.2% to Rs. 46,090cr, which was below our estimates of Rs. 49,094cr on account of lowerthan-expected top-line in the JLR and standalone operations. The JLR top-line (up 15.7% qoq) was impacted mainly due to 5.5% qoq decline in net average realization led by unfavorable product-mix (higher share of Evoque and Freelander). The standalone top-line (down 14.8% qoq) too was below our estimates on account of inferior product-mix (higher share of light commercial vehicles) and higher discounts leading to a 7.9% qoq decline in net average realization.

On a sequential basis, consolidated EBITDA margins stood flat at 12.3% (lower than our estimates of 12.8%) which led to a 6.1% growth in operating profit to Rs. 5,657cr. The EBITDA margins at JLR declined 80bp sequentially led by inferior product-mix and higher marketing costs related to the launch of the new Range Rover. On the standalone front, EBITDA margins contracted sharply by 387bp qoq to 1.4% due to adverse volume-mix, lower utilization levels and higher discounts and marketing spends in the passenger vehicle and medium and heavy commercial vehicle business. However, adjusted net profit declined 13.6% qoq (49.5% yoy) to Rs. 1,801cr, lower than our expectations of Rs. 2,865cr, on account of higher depreciation expense (up 29.8% qoq), forex loss of Rs. 174cr and higher tax rate (at 38.7% as against 32% in 2QFY2013). We are still in the process of revising our numbers and therefore the rating is under review.

Source : Equity Bulls

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