Views on Tata Motors 3QFY2014 results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst - Auto & Auto Ancillary, Angel Broking) on Tata Motors 3QFY2014 results:

Tata Motors result beats estimates

"Tata Motors (TTMT) reported stellar results for 3QFY2014, significantly beating consensus as well as our expectations. While the consolidated top-line was 6% ahead of our estimates; bottom-line was ahead by 47% with EBITDA margins coming in 175bp above our expectations at 15.6%. The results were once again driven by an impressive Jaguar and Land Rover performance (JLR), which posted record EBITDA margins of 17.9%, higher than our expectations of 15.8%. The standalone operations deteriorated further posting an operating loss of Rs. 459cr, against our expectations of a marginal profit of Rs. 48cr, largely due to negative operating leverage following steep decline in volumes (down 36.1% yoy and 13.9% qoq) and increase in discounts and promotional spends. Standalone net profit, however, stood at Rs. 1,290cr, as it was boosted by profit of Rs. 1,945cr related to sale of investment in a subsidiary. Adjusted for the exceptional profit, the standalone entity reported a bottom-line loss of Rs. 658cr, higher than our expectations of a loss of Rs. 568cr.

The consolidated top-line registered a better-than-expected growth of 38.6% yoy (12.3% qoq) to Rs. 63,877cr driven by a stellar revenue growth of 61.1% yoy (17.7% qoq) at JLR in INR terms. JLR performance continues to ride on a robust 22.7% and 14.1% yoy growth in volumes and net average realization respectively and aided further by the translation gains on account of the INR depreciation against the GBP. While the volume performance was backed by the new launches (Range Rover, Range Rover Sport, Jaguar F type, XF Sportbrake and smaller engine options of XF and XJ); net average realization growth was led by favorable product-mix (higher share of Range Rover and Range Rover Sport) and richer geography mix (higher share of China). Consolidated EBITDA margin continues to surprise positively and stood at 15.6% (up 330bp yoy and 39bp qoq), substantially ahead of our estimates of 13.8%. The operating performance was led by JLR which posted record EBITDA margins of 17.9% led by superior product and geography mix and operating leverage benefits. Led by a strong operating performance, consolidated operating profit surged 75.9% yoy (15.2% qoq) to Rs. 9,948cr. Consequently adjusted net profit increased 173.7% yoy (29.2% qoq) to Rs. 4,929cr. The tax rate during the quarter stood lower at 21.4% (as against 38.7% in 3QFY2013 and 25.1% in 2QFY2014) which also aided the bottom-line to certain extent. During the quarter, JLR net profit increased substantially by 109.2% yoy to GBP619mn.

Going ahead, we expect headwinds in the standalone business to continue in the near term due to weak macro-economic environment which is expected to continue impacting the domestic volumes. However, we expect JLR to sustain its strong performance driven by continued momentum in the global luxury vehicle market and aided further by the strong product launch pipeline and the success of the newly launched models. We retain our positive view on the stock and maintain our Buy rating. Our target price is currently under review."

Tata Motors 3QFY2014 Result Review (CMP: Rs. 364/ TP: Under review/ Recommendation: Buy)

Source : Equity Bulls

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