>TATA MOTORS (RELIANCE MONEY)

No signs of revival

TAMO’s Q4FY09 (implied results) performance is better than our expectations mainly due to adoption of new guideline for AS-11. TAMO’s margins remained under pressure for FY09, but net profit was better than our expectations. The company has already tied up for funds for JLR, but its leverage remains a concern in the short to medium term. We expect interest cost to go up in the near future. We continue to remain negative on CV industry as there are no signs of revival yet and assign SELL rating to the stock.

■ FY09 top line declines by 11% y-o-y
TAMO’s FY09 net sales reported a decline of 11% y-o-y to Rs.256.6bn on account of lower volumes. Sales volume for year were down by 16% y-o-y due to fall across all the three segments viz. passenger car, CV and exports. PC, CV and export sales of the company reported a fall of 5% y-o-y, 15% y-o-y and 39% y-oy respectively. However the company has improved its market share in the CV industry from 62.2% to 63.8%. Net sales realizations of the company during FY09 reported an improvement of 6% y-o-y to Rs.488,516 per vehicle. TAMO’s implied results for Q4FY09 suggests its top line went down by 21% y-o-y to Rs.68.9bn mainly due to drop in sales volume by 23% y-o-y.

■ AS-11 supports net profit
For FY09 TAMO’s EBITDA declined by 41% y-o-y to Rs.17bn and EBITDA margins came down by 334bps y-o-y to 6.6%. Higher raw material prices, lower volumes and higher employee cost impacted margins for the year. TAMO during the year has divested few of its investments (TACO, Tata Tele, Tata Steel etc) which supported its other income for the year. Other income for FY09 went up by 92% y-o-y to Rs.9.25bn. Net profit for the year came down by 51% y-o-y to Rs.10bn. TAMO has also taken advantage of change in AS-11 guidelines and due to which its PBT went up by Rs.5.19bn for the year. TAMO’s implied results for Q4FY09 suggests its EBITDA margins declined by 125bps y-o-y to 7.8% better than Q3FY09 margins of 1.6%. Net profit for Q4FY09 went up by 236% y-o-y to Rs.7219mn mainly due to change in AS-11 benefit.

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