Tata Motors - LCV sales still hold; M&HCV seeing improvement - ElaraCapital

- Sales trend remained unchanged, with still some pressure on M&HCV sales, and downright rejection of PC and UV portfolio by the market, dragging domestic sales down by 17% YoY, supported only by still resilient LCV sales (up 4.9% YoY) which too have started moderating on high base

- The M&HCV down cycle, which dogged the CV sales performance in FY13, is seeing slight pick up since past four months with sales growth at 1.8% YoY in Apr'13. However, we would watch out the trend for few more months before terming it a reverse cycle

- In case of PC and UV portfolios, the fall has only sharpened this time posting 52% and 35% fall respectively. We expect sales to improve marginally only from H2FY14E onwards, as the base catches up, and the company (hopefully) sees some success with its upcoming launches

- LCV sales, the only growth pillar, which remained resilient throughout the last fiscal recorded a moderate 4.9% YoY growth in Apr'13

- Exports improved by 28% YoY to 2565 but that's on a low base of last year

- We note that with an ongoing slowdown in volumes especially that of M&HCVs, standalone financial performance of the Company is ought to be impacted this year too

Our view: Tata Motors has seen the worst of the ongoing demand slowdown in 4W space, largely due to heavy exposure to CVs and languishing car portfolio. However, the company is likely to introduce 25 launches in coming months, in both CV and PV segments, some of which seem highly promising, and are likely to revive volumes from the current low base going forward. Coupled with steady performance at JLR, earnings trajectory is likely to stay healthy. Remain positive.

Source : Equity Bulls

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