Accumulate Tata Motors; target of Rs 308: Angel Broking

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Accumulate Tata Motors; target of Rs 308: Angel Broking

Angel Broking is bullish on Tata Motors and has recommended accumulate rating on the stock with a target price of Rs 308 in its February 15, 2012 research report.

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Angel Broking is bullish on Tata Motors and has recommended accumulate rating on the stock with a target price of Rs 308 in its February 15, 2012 research report.

"Tata Motors (TTMT) reported an extremely strong set of results, driven by stellar performance at JLR. The company's top line grew by robust 44% yoy (25% qoq), led by 41.5% yoy (28.6% qoq) growth in JLR sales, which were driven by a 36.7% yoy (26.9% qoq) jump in volumes and 3.1% yoy (0.8% qoq) improvement in net average realization. The company's operating margin surprised positively and stood at 15.1% on account of better-than-expected performance at JLR (EBITDA margin at 18.2%), which benefitted from superior product and geography mix, favorable forex and higher operating leverage. As a result, net profit increased by strong 40.5% yoy (81.4% qoq) to Rs 3,406cr."

"TTMT posted disappointing standalone results on account of unfavorable product mix, higher marketing spends in the passenger vehicle (PV) business and raw-material cost pressures. The top line reported healthy 15.8% yoy (3% qoq) growth, driven by 21.5% yoy (10% qoq) growth in volumes. Net average realization, however, declined by 4.8% yoy (6.4% qoq) due to higher proportion of PVs in the total volume mix. Operating margin continued to be under stress and declined by 376bp yoy to 6.4%, led by higher marketing spends and commodity cost pressures. Hence, net profit declined by 57.6% yoy to Rs 174cr."

"We have revised our consolidated earnings estimates upwards by 19.5%/32.4% for FY2012/13 on account of better-than-expected JLR performance during the quarter. We broadly retain our standalone earnings estimates and increase our JLR estimates over FY2012/13, driven by the increase in our volume and EBITDA margin estimates. We have increased JLR volume estimates by ~12% for FY2013 and margin estimates for JLR by ~100bp in FY2013. At Rs 286, the stock is trading at 7.4x FY2013E earnings. We maintain Accumulate on the stock with an SOTP target price of Rs 308," says Angel Broking research report.

Institutional holding more than 40% in Indian cos

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To read the full report click on the attachment