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Tata Motors (TTMT) - Qtr. Update - Dated - February 14, 2013




Axis Capital Limited


15 Feb 2013





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Tata Motors’ Q3 consol APAT at Rs 17.4 bn was significantly below our estimate. Standalone revenue at Rs 106 bn was 5% below estimate and EBIDTA declined to 1.4% (similar to Q3FY09) due to lower utilization and higher marketing spend. JLR margin at 14% was above our revised estimate (post profit warning) of 13.6%. Expect JLR FCF (-3.5% vs. 3% in H1) to rebound sharply in Q4 to 5% on working capital normalization. Strong volumes due to new launches and improving product mix to ensure margin uptick from Q4. We raise our FY14 and FY15 JLR volume estimates by 2% to 415K and 451K units. While our EBIDTA estimates are lowered by 1% each for FY14 and FY15, higher capex, interest and depreciation lead to EPS downgrade of 14% each to Rs 40 and Rs 46 respectively. Maintain BUY with revised SOTP-based TP of Rs 354 (Rs 370 earlier), implying an upside of 19% from CMP of Rs 297. Key highlights JLR:  January 2013 wholesale billings reflected all the recent launches - new Range Rover, XF Sportsbrake, 2 ltr/3 ltr petrol engine options for China and US (in XJ/XF), and all-wheel drive option. F type sales are expected from April 2013. Expect announcement of new Range Rover Sports in 6 weeks. We expect company to start wholesale billing in Q1FY14 and retail sales from Q2FY14  Adverse currency impact on margin was 50 bps QoQ in Q3. Impact of favorable currency in January/February 2013 will be visible with a lag as JLR hedges 80% of its next quarter requirements  Plant utilization level – Halewood (Freelander and Evoque) and Solihul (Range Rover, Range Rover Sports, Discovery and Defender) are working at 3 shifts. Castle Bromwich (Jaguar) has started second shift to support production of new model. This has also led to higher staff cost India:  Q3 margin was affected by low utilization, higher incentives, and higher marketing spend. No major pressure was seen on raw material. The scenario is likely to continue in Q4  M&HCVs - no improvement in demand scenario. The impact of government efforts to revive economy will be visible on M&HCV demand with a lag of two quarters. In Q4, discounts are flat vs. Q3 Regards, Chirag Shah (Sr VP – Automobiles) Institutional Equity Research Axis Capital Limited Tel: 9122 4325 1148 Ronak Sarda (AVP – Automobiles) Institutional Equity Research Axis Capital Limited Tel: 9122 4325 1137

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