Tata Motors - LCVs fall for the first time since 2008; M&HCVs recovering - ElaraCapital

- LCVs which were the driving force for Tata's volume growth over the past 3-4 years saw its first decline since 2008, posting a de-growth of 11% YoY

- On the other hand, M&HCV down cycle which dogged the CV sales performance in FY13, has seen pick up over the past few months; although May'13 posted de-growth on a YoY basis, volumes remained stable at ~10K units (up 1% MoM)

- In case of PC and UV portfolios, the weakness has remained with de-growth of 49% and 30% YoY respectively in May'13

- We note that the management plans to introduce new products across CV and PV segments, from the current month itself, hence the sharp cut in volumes might be to clear the old inventory, and volumes are likely to see gradual recovery in coming months

- Exports improved on a sequential basis but remained 8% lower than the previous year

- The YTD growth for the Company remains dismal at minus 19% YoY, implying losses continuing in Q1FY14E 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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