Tata Motors - JLR entering healthy product cycle... - ICICIdirect

Tata Motors (TML) has announced its Q3FY13 results, which were a disappointment on the domestic front, incurring a much higher than anticipated loss. However, JLR was better with some pre-launch oneoffs/negative FX shaving 50-100 bps of margins. The domestic business was hit as production was cut down leading to low OPM (2.2%) while JLR held margins at 14% (IFRS) even as some product mix and model change impacted ASPs (down ~5.5% QoQ).

On the outlook, the domestic business has hit a nadir as we had anticipated and feel going in FY14E, FY15E an upturn is expected the velocity of which remains unknown. On JLR, we believe new products (RR, RRSport, XFSportsbrake, F-Type) are bound to improve product mix, volumes, helping improve margins. We remain confident on the JLR business led by strong demand from China and the US. Thus, we continue to maintain our upgrade of JLR's EV/EBITDA multiple at 3.5x.The stock remains attractive with high RoEs (>20%), declining debt levels (~0.37x net debt).

We continue to maintain BUY on the stock with a target price of Rs. 360.

Source : Equity Bulls

Keywords