TTMT - Q1 FY22 Result Update - YES Securities

(Rating: Not rated)

Operationally weak v/s consensus, JLR order book healthy at 110k units

- Consol revenues declined 25% QoQ to Rs664b (cons Rs613b) led by 36% QoQ decline in global dispatches impacted by lockdowns and chip shortages.

- Impacted by negative op. leverage, consol EBITDA declined ~59% QoQ to Rs52.5b (cons Rs55.3b) with margins at 7.9% (cons 9%, -6.5% QoQ).

- Higher tax expense at Rs17.4b (v/s -Rs1.3b in 4QFY21), led to adj. loss of Rs44.5b (cons loss of Rs21b).

- S/A performance weak led by lower volumes (-41% YoY) with margins at 2.5% (-620bp QoQ) as CV EBIDTA came in at +0.1% (-9% QoQ) and PV EBITDA at 4.1% (-80bp QoQ).

- JLR - 1QFY22 dispatches fell -38% offset by ASP increase of 6% QoQ led to revenues of GBP5b (-24% QoQ). Higher cost and negative op. leverage impacted margins at 9% (-630bp QoQ).

- China JLR - volumes declined 7.7% QoQ, EBITDA margins at +2.7% (-330bp QoQ) and loss at GBP20m (v/s loss of GBP19m in 4QFY21).

- JLR demand remains strong with record order book of 110k units.

- Net consol Auto debt increased to Rs613b (v/s 409b in FY21) impacted by WC.

- TTMT trades at 18.3x/8.3x bloom FY22/23 consol EPS. Not rated

Call highlights

JLR - Volume recovery key as semiconductor visibility uncertain

- Chip shortage - expected to improve from 3Q as supply is expected to improve from Japan. Not expect a delay in new launch timeline.

- FY24-26 profitability guidance unchanged while no guidance for FY22 due to production uncertainty.

- VME spend to sustain below 6% (of sales) with current spend at 3%. This is expected to inch up to 4% once volumes normalize.

- China JV losses - impacted by semiconductor supply. Have launched cost reduction program.

- Inventory at 1.3 months from 2.5 months. New launches from RR should help.

- Negative FCF of GBP996m was primarily led by WC unwind of -GBP922m.

- Have reduced inventory by 30% across markets across name plates.

Standalone - PV outlook strong, CV recovering

- Price increase - CV - ~2.5% price increase in April and ~1-2.5% July. PV - ~1.8% in May and to take further increase in 2QFY22.

- PV - dealer inventory is just 6 days. Current EV order book is 14-16 weeks based on past 2/3 months vols.

- EV sales mix - 3% in 1QFY22, 2% FY21, 0.2% FY20.

- Tata Motor Finance collection efficiency improved to 88% in Jun-21 (v/s 76% in May and 100% in 4QFY21).

- View - While all the three businesses of TTMT are witnessing cyclical upturn, supply side issues is delaying recovery particularly at JLR. While FY22 would be a blip to profitability at JLR (as 1H is washout), it should recover with volume coming back. The stock trades at 8.3x bloom consol EPS. Not rated.

Shares of TATA MOTORS LTD. was last trading in BSE at Rs. 291.3 as compared to the previous close of Rs. 293.1. The total number of shares traded during the day was 14370419 in over 25682 trades.

The stock hit an intraday high of Rs. 297.6 and intraday low of 288.7. The net turnover during the day was Rs. 4177453190.

Source : Equity Bulls

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