Tata Motors - Q4FY13 result - Stellar quarter!; Maintain BUY - IDBI Capital

Tata Motors (TTMT) Q4FY13 consolidated APAT was ahead of our and street estimates at Rs39.2 bn (IDBIe Rs30.6 bn), largely led by stellar performance at JLR business, while India business continues to reel under pressure (PBT loss of Rs4.8 bn, Net loss of Rs3.1 bn). Standalone revenue was in line at Rs111 bn, down 33%/up 4% YoY/QoQ. JLR revenue was ahead at GBP5.1 bn (IDBIe GBP4.8 bn) on better than expected realization at GBP43.4k, up 3%/8% (higher share of new Range Rover and China). Standalone EBITDA margin was marginally ahead at 2% (we estimated break even), with continued weakness led by higher discounting and marketing spends in PVs. JLR margin was significantly ahead at 16.9% as per IFRS (17.8% as per IGAAP), led by superior product and geography mix (higher share of new RR and China), favourable forex and volume increase - there were no significant one-offs in the quarter and the mgmt expects to maintain healthy margin going forward. Standalone net loss was at Rs3.1 bn, led by weak operating performance, continued higher interest costs and depreciation. JLR APAT at GBP496 mn (adjusting for MTM gain of GBP118 mn on MTM revaluation loss) was significantly ahead, which led to earnings beat.

Mgmt has guided for Standalone business:

- Headwinds to continue in MHCVs and PVs on subdued macro environment; however outlook on SCVs remains positive,

- margin to remain under pressure on higher discounting, weak demand; however likely to improve over next few quarters.

JLR:

- Positive on volume traction led by new RR, RR Sport, F-Type and derivatives of existing products - it has 8 new launches/variants slated for FY14,

- margin to remain healthy by geography mix (expected to remain strong as share of China increases), new launches (RR, RR Sport and F-Type all being high margin).

- Bhaumik Bhatia (Bhaumik.bhatia@idbicapital.com, +91-22-4322 1189) largely maintain our standalone earnings for FY14. We raise FY14 JLR margin estimate by 60bps to 15.9% to factor in Q4FY13 operating beat, while maintaining our volume estimates at 424k units (YoY growth of 14%). Consequently, our JLR earnings are raised by 7% and consolidated earnings by 6%. We introduce FY15 estimates with standalone volume growth of 10%, JLR volume growth of 13% (15.7% EBITDA margin), resulting in consolidated EPS at Rs48.

- Our SOTP valuation is revised upwards to Rs332, with core business valued at EV of Rs69, JLR at Rs260 (4x FY14 EV/EBITDA) and other subsidiaries at Rs30, with net debt per share of Rs28. We expect the stock to react positively to a strong Q4FY13 and stable outlook. We remain positive on JLR's ability to sustain volumes (led by strong product pipeline) and profits and consequently healthy balance sheet profile - consolidated net automotive D/E stays healthy at 0.24x, while JLR is net cash of 0.2x as of Mar'13. Tata Motors remains our top pick in Autos.

Source : Equity Bulls

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