Automobile - Tata Motors likely to support robust earnings performance - Angel Broking

During 3QFY2014 volumes for our coverage automobile companies continued to remain sluggish as demand decelerated post the festival season owing to weak consumer sentiments. Domestic industry volumes witnessed a growth of about 3.0% yoy YTD in FY2014, driven entirely by the two-wheeler and the tractor segments, which were aided by rural demand on the back of good monsoon.

We expect our coverage automobile companies to post a strong earnings growth of 40.7% yoy, despite the yoy decline in volumes, led by robust growth at Tata Motors, driven yet again by an impressive Jaguar and Land Rover (JLR) performance. We expect our coverage auto universe's top-line to register a strong growth of 16.5% yoy, primarily aided by INR depreciation on a yoy basis and price increases. Led by the price increases and favorable currency movement, we expect our coverage auto companies' margins to expand by 182bp yoy. Nevertheless, excluding the performance of Tata Motors, we expect our coverage automobile universe to register an almost flat revenue performance while earnings report a growth of about 9.4% yoy supported by margin expansion.

Source : Equity Bulls

Keywords