>TATA MOTORS (ALCHEMY)

Key highlights of 3QFY10 consolidated results:

■ Volumes: JLR – Tata Motors posted a growth of 28% qoq in JLR wholesale sales. The company sold 56,726 units of JLR in 3QFY10. The retail sales stood at ~55,000 units in 3QFY10 vs. ~47,000 reported in 2QFY10.

■ Revenues: Tata Motors’ consolidated revenues stood at Rs260.0bn in 3QFY10, up 47% yoy compared to 3QFY09 and up 23% qoq.

■ RMC: The RMC as a % to net sales was up by 35bps qoq at 66.9% in 3QFY10.

JLR reports 28% qoq growth in volumes; operating efficiencies kick in

■ Staff Cost: The staff cost was down by 220 bps qoq in 3QFY10 to 8.7%. It stood at Rs22.7bn versus Rs23.0bn in 2QFY10 thus signifying better operating efficiencies due to higher volumes.

■ EBIDTA: The consolidated EBIDTA margin improved by 420bps qoq to 11.7% in 3QFY10 versus 7.5% reported in 2QFY10. The EBIDTA stood at Rs30.5bn, up 92% qoq.

■ Other income: The Company reported negligible other income of Rs47mn in 3QFY10 versus Rs4067 in 2QFY10.

■ Interest and Debt: The interest cost in 3QFY10 stood at Rs5,458mn versus Rs5,590mn in 2QFY10. The total net debt outstanding is around Rs23bn.

■ Depreciation: The depreciation for 3QFY10 stood at Rs13,072mn vs.Rs8,479mn in 2QFY10. It also had a product development expense write off of Rs857mn in 3QFY10 versus Rs858mn in

2QFY10.

■ Exceptional Item: It includes a notional loss of Rs2,342mn on revaluation of foreign currency borrowings, deposits and loans. The company had reported a notional loss of Rs2,184mn in 2QFY10.

■ PAT: The company reported a profit of Rs6,503mn, against a loss of Rs25.9bn in 3QFY09, translating into a EPS of Rs12.0.

View and Recommendation

The domestic story of Tata Motors continues to show robust growth on the back of revival in Commercial vehicles. The sales appear to be improving month on month for JLR which makes us cautiously optimistic about the revival. The new products and cost reduction initiatives have helped the company to report a positive EBIDTA margin although the increased interest cost and depreciation have eaten into the operating profits of the company. The stock is currently trading at a P/E of 15.2xFY11 E standalone EPS of Rs46.8. We maintain Accumulate on the stock.

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