Buy Tata Motors; target of Rs 323: Motilal Oswal

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Buy Tata Motors; target of Rs 323: Motilal Oswal

Motilal Oswal is bullish on Tata Motors and has recommended buy rating on the stock with a target of Rs 323 in its February 15, 2012 research report.

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Motilal Oswal is bullish on Tata Motors and has recommended buy rating on the stock with a target of Rs 323 in its February 15, 2012 research report.

"Tata Motors (TTMT) posted better than expected results for 3QFY12. Consolidated EBITDA margin for the quarter was its best ever at 16% (v/s our estimate of 13.1%). Recurring PAT was INR35.4b (v/s our estimate of INR29.3b). While JLR surprised positively, with its highest ever EBITDA margin, the performance of the domestic business did not meet expectations. Consolidated sales grew 44% YoY (25% QoQ) to INR453b (v/s our est. of INR451b). EBITDA margin was 16% (+270bp QoQ, +70bp YoY). PAT grew 44% YoY to INR35.4b (v/s our est. of INR29.3b); growth was restricted due to higher than estimated depreciation and tax rate. TTMT posted net MTM forex loss of INR1.6b, after reversal of 1HFY12 loss of INR6.6b." 

"JLR's revenue grew 41% YoY (28% QoQ) to GBP3.7b (v/s est. of GBP3.7b). EBITDA margin expanded by 520bp QoQ and 270bp YoY to 20.1% (v/s est. of 15.8%), led by favorable currency movement (+90bp QoQ), better product and market mix, higher operating leverage and revaluation of forex liability (+160bp QoQ). JLR's PAT grew 85% QoQ and 60% YoY to GBP440m (v/s est. of GBP336m, and GBP238m in 2QFY12) despite higher tax. Standalone volumes grew 19% YoY (9% QoQ). However, realizations declined ~1% YoY (5.8% QoQ) due to adverse product mix, resulting in revenue growth of 18% YoY (3% QoQ) to INR133b (v/s our estimate of INR141b). Further, higher marketing spend led to margin contraction of 410bp YoY and 50bp QoQ. Lower interest and tax boosted adjusted PAT to INR2.5b (v/s estimate of INR3b) - a decline of 42% YoY and 11% QoQ." 

"We upgrade our consolidated normalized EPS estimates by 13% for FY12 to INR21.1 and by 8% for FY13 to INR23.9. The stock trades at 7.1x FY13E consolidated EPS and 11.2x FY13E normalized consolidated EPS. Maintain Buy with revised target price is INR323 (FY13E SOTP-based)," says Motilal Oswal research report.

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To read the full report click on the attachment