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Feb 19, 2013, 03.36 PM IST | Source: CNBC-TV18

Accumulate Tata Motors; target of Rs 317: PLilladher

Prabhudas Lilladher is bullish on Tata Motors and has recommended accumulate rating on the stock with a target of Rs 317 in its February 14, 2013 research report.

Prabhudas Lilladher is bullish on Tata Motors and has recommended accumulate rating on the stock with a target of Rs 317 in its February 14, 2013 research report.

“Tata Motors’ Q3FY13 results were below estimates, mainly on account of subdued performance of the standalone operations (Loss of Rs4.5bn). JLR reported a 300bps YoY decline in margins at 14.0percent (in line with expectation) on account of inferior product mix, launch costs of all-new Range Rover and higher marketing cost. We are revising our consolidated earnings estimates downwards by 7-8percent to take into account higher depreciation and amortisation expenses on account of increased capex, R&D spend and lower standalone profit. Management is optimistic about the new launches at JLR including the recently launched ‘Range Rover’ and indicated strong demand for the same.”

“Tata Motors posted a 16.8percent YoY de-growth in the Tata Vehicles segment revenues, while JLR reported a top-line growth of 11.0percent YoY. This led to a flat growth in the company’s consolidated top-line at Rs461bn (PLe: Rs480bn). Better operating margins at JLR (@ 14.0percent) negated the impact of a dismal 2.2percent.EBITDA margin at the standalone level. As a result, the consolidated EBITDA margin declined by 270bps YoY to 13.3percent. EBITDA de-grew by 14.9percent YoY to Rs61.4bn (PLe: Rs63.0bn). On account of capacity expansion and R&D spend at JLR, depreciation increased by 28.1percent YoY to Rs20.7bn. As a result, Adj. PAT de-grew by 49.5percent YoY to Rs18.0bn (PLe: Rs22.5bn).”

“The stock is currently trading at 7.9x FY14E EPS and 6.6x FY15E EPS. However, adjusting for R&D expense, the valuation stands at 9.6x FY14E and 8.1x FY15E. This seems fair compared to global peers’ average P/E of 8-9.0x FY14E earnings. On account of ~6.7percent potential upside from the current levels, we maintain our ‘accumulate’ call on the stock,” says prabhudas Lilladher research report.  

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