Emkay Global Financial Services is bullish on Tata Motors and has recommended accumulate rating on the stock with a target of Rs 300 in its November 7, 2012 research report.
“Tata Motors consolidated Q2FY13 operating performance was in-line with est. with impressive JLR performance offset by poor standalone margins. Consolidated revenues at Rs 434 bn (+20% YoY, +0.2% QoQ) and EBITDA margins at 12.3% (-10 bps YoY, -100 bps QoQ) were in-line with est. Adjusted net profit at Rs 20.8 bn (-4.7% YoY, -18.5% QoQ) was ~8% below est. on higher than expected tax outgo and lower other income. JLR reported strong margins at 14.8% (+60bps YoY, +30 bps QoQ), 100 bps above est. despite slightly lower-than-expected topline (GBP 3.3 bn, +12.8% YoY, -9.6% QoQ). Key surprise was RM to sales which declined 170 bps QoQ to 63% which as per mgmt benefited from better market mix, fall in commodity prices and favorable currency. This should offset some concern of sustainability of a >15% margin from JLR.”
“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. New Range Rover, to be introduced in Q3, has seen strong interests and should lead to improved margins. Additionally the launch of the F-type and Sportbrake should further improve product mix. Ramp up in China dealers to 130 by FY13-end (100 currently) to provide fresh impetus for China sales. We factor in ~360k units/400k units in volumes for FY13/14.”
“We expect TTMT to report ~10% earnings CAGR between FY13-15E driven by JLR and expect standalone performance to have bottomed out. Our SOTP based TP of Rs 300 is based on 7.5x EV/EBITDA for standalone business (Rs 66), 3.5x EV/EBITDA for JLR (Rs 202) and other subsidiaries at 12xFY14E earnings (Rs 31). We have an accumulate rating on the stock,” says Emkay Global Financial Services research report. Shares held by Financial Institutions/Banks Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment
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