Views on Tata Motors 4QFY2014 results - Angel Broking

Views of Mr. Yaresh Kothari (Research Analyst – Auto & Auto Ancillary, Angel Broking) on Tata Motors 4QFY2014 results:

Tata Motors reports lower-than-expected performance

"Tata Motors (TTMT) consolidated bottom-line (adjusted) for 4QFY2014 at Rs. 4,327cr missed our expectations of Rs. 4,831cr led by lower-than-expected JLR performance. While JLR performance aided the overall consolidated results, the top-line and bottom-line at JLR came in below our expectations. Although the consolidated performance was lower-than-expected, we would like to highlight that the miss at the bottom-line front was higher (by 10.4%) led by steep surge in interest expense at JLR as against a 3.2% miss on the operating front. At the standalone level, the company continued to post a loss which stood at Rs. 770cr (adjusted) and EBITDA margins deteriorated to negative 7.5% from negative 5.9% in 3QFY2014. The standalone performance continues to be impacted due to the negative operating leverage following steep decline in volumes and increase in discounts and promotional spends.

The consolidated top-line registered a growth of 16.6% yoy to Rs. 65,317cr, slightly lower than our expectations of Rs. 68,395cr primarily due to lower-than-expected top-line growth at JLR. The JLR top-line registered a growth of 5.9% yoy to £5,349mn, which was lower than our expectations of £5,550mn. In INR terms, JLR revenues surged by 29.3% yoy to Rs. 55,326cr led by the favorable currency movement. The performance at JLR was impacted due to a 3.4% qoq decline in net average realization. Volume growth at JLR too moderated to 4% due to the base effect. Standalone top-line at Rs. 8549cr however, surprised positively driven by a strong 15.1% yoy growth in net average realization aided by superior product-mix. Consolidated EBITDA margin stood strong at 15.3% (up 136bp yoy and flat qoq), in-line with our expectations of 15.1%, driven by better-than-expected margin profile at JLR. JLR margins stood at 17.2% and benefitted from operating leverage benefits and favorable geography mix. Adjusted net profit increased 10.3% yoy (down 12.2% qoq) to Rs. 4,327cr, however, it was lower than our expectations of Rs. 4,831cr due to a steep 72.1% yoy (66% qoq) increase in interest expense. Higher interest expense can be attributed to the costs related to tendering and early redemption of JLR debt and reversal of gains on related bond call options. Additionally, depreciation expense too increased 33.2% yoy (9.3% qoq) which impacted the bottom-line results. Net profit at JLR stood at £449mn as against our expectations of £558mn.

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. Our target price, however, is currently under review."

Tata Motors 4QFY2014 Result Review (CMP: Rs. 428/ TP: Under review/ Recommendation: Buy)

Shares of TATA MOTORS LTD. was last trading in BSE at Rs.438.55 as compared to the previous close of Rs. 434.8. The total number of shares traded during the day was 655457 in over 15637 trades.

The stock hit an intraday high of Rs. 440 and intraday low of 428.7. The net turnover during the day was Rs. 285545005.

Source : Equity Bulls

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