Analysts maintain 'buy' on Tata Motors, JLR to drive growth
Most analysts maintained a "buy" rating on Tata Motors, despite disappointing second quarter results, sending the stock up 4 percent on Thursday. The street particularly cheered the strong growth at the company's British Jaguar Land Rover unit, even as a slowdown in standalone business dragged overall earnings.
November 08, 2012 / 15:53 IST
Moneycontrol Bureau
Most analysts maintained a "buy" rating on Tata Motors, despite disappointing second quarter results, sending the stock up 4 percent on Thursday. The street particularly cheered the strong growth at the company's British Jaguar Land Rover unit, even as a slowdown in standalone business dragged overall earnings.The India's largest commercial vehicle maker's July-Sep quarter consolidated net profit rose lower-than-expected 11 percent year-on-year at Rs 2,075 crore (analysts expected Rs 2,200 crore), while revenue gained 20 percent at Rs 43,403 crore (analysts expected Rs 43,900).JLR's net profit increased to GBP 305 million from GBP 172 million a year ago and revenue was up 13 percent to GBP 3.3 billion, shrugging off the downturn in Europe and slowdown fears in China, which accounted for 21 percent of JLR's global sales. The standalone business, hurt by sluggish demand for medium and heavy commercial vehicles, saw its profit jump to Rs 867 crore from Rs 102 crore, helped by GBP 150 million dividend paid by JLR, without which there would be a loss, last quarter."Even though Tata Motors' overall Q2 earnings are disappointing, there are some bright spots. These are quarter-on-quarter and year-on-year increase in gross margin, worst quarterly earnings in India business in 5 years should start recovering in coming quarters...For Tata Motors, the second half is historically much better than the first half...We remain positive on the earnings recovery in H2," said Jigar Shah of Kim Eng Securities India, a unit of Malaysia's Maybank Investment Bank.It has a "buy" rating on Tata Motors, with a target price of Rs 335.Other analysts too remained positive on the company's growth and pickup in domestic business going ahead.Axis Direct: We expect JLR's growth momentum to continue, driven by improving product mix -- launch of new Range Rover and XF Sportsbrake, introduction of XF-2 litre petrol options in China and lower discounts. Rating: Buy. Target Price: Rs 313.Emkay: While in the near-term, JLR continues to witness the positive impact of currency and geographic mix, we expect the momentum to sustain driven by its new launch pipeline and ramp-up in China. We expect Tata Motors to report 10 percent earnings CAGR between FY13-15 driven by JLR and
expect standalone performance to have bottomed out. Rating: Accumulate. Target: Rs 300. HSBC: Tata Motors reported decent quarter with JLR margins positively surprising; domestic business continues to struggle. Investment thesis is largely contigent on the pick up in JLR volumes in the coming months, on which we are positive. Rating: Overweight. Target: Rs 320.IDBI Capital: Standalone EBITDA margin at 5.2 percent was the weakest in 4 yrs, reflecting revenue miss; while commodity inflation, higher discounting and marketing spends in passenger vehicles continue to put pressure on margin. JLR margin was ahead at 14.8 percent, which is commendable, as it comes despite higher share of low margin Evoque and lower operating leverage; aided by favourable forex and richer mix in favour of China. Rating: Buy. Target: Rs 309.Nomura: Domestic MHCV industry continues to remain weak due to slowdown in industrial production. For Tata Motors, we now expect 15 percent decline in MHCV volumes in FY13. Overall we have reduced our FY13 consolidated EPS estimates by 2 percent as the sharp decline in standalone business offsets increases in JLR. For FY14, we have increased our consolidated EPS estimates by 5 percent, driven by an 11 percent increase in the JLR business. Rating: Neutral. Target: Increased to Rs 284 from Rs 261.At 10:10 hrs Tata Motors was up 3.9 percent at Rs 279.85 on NSE. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
