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