Tuesday, August 21, 2012


In line performance, JLR reported 110 bps YoY expansion in EBIDTA margin
As per our expectation TML reported healthy operating performance in Q1FY13 led by stellar performance in JLR business (110 bps YoY expansion in EBIDTA margin to 14.5%). However its standalone business showed muted performance (170 bps YoY contraction in EBIDTA margin to 6.6%).

Reported EBIDTA at `57.5 bn close to our estimates of `55.7bn
We believe that healthy volume growth in JLR business (34.4% YoY), favourable currency movement (average GBP/Re at 85.8 in Q1FY13 against 72.9 in Q1FY12) and increase in volumes in China (China contributed 21.5% to the total volumes in Q1FY13 against 15.7% in Q1FY12), helped TML to report healthy performance in Q1FY13. Revenue increased by 30.1% YoY to `433.2 bn (against estimates of `430.3bn).EBIDTA increased by 35.9% YoY to `57.5 bn (against estimates of `55.75 bn). EBIDTA margin expanded by 60 bps YoY to 13.3% (against our expectation of 13%).APAT increased by 30.6% YoY to `26.8bn (against our estimates of `27.2bn). It is to be highlighted that JLR board has proposed a dividend of GBP 150 mn to Tata Motors (parent company), which will likely to be paid off in August 2012.

Not offering discounts in JLR but indicated a caution on EBIDTA margin front
The management has indicated that currently they are not offering any kind of discounts (according to media reports, its competitors are offering) to its customers (including China market). However the management has not ruled out the possibility of increase in marketing cost in coming future due to increase in competitive pressure. Further management has shared a cautious optimistic outlook on EBIDTA margin front. Hence in anticipation of pressure on margin, we have tweaked our JLR’s EBIDTA margin expectation to 14.5% for FY13E.

Maintain outperform rating with target price of `297 
In Q1FY13 TML’s operating performance was in line with our expectation. Post Q1FY13 result, we maintain our FY13E volume estimates for JLR at 364k units and standalone business at 967k. However, we tweaked conso EBIDTA margin expectation to 12.6% (from 13%) for FY13E on lowering JLR’s EBIDTA margin expectation to 14.5% from 15.2% (in line with its current EBIDTA margin).With this we maintain our Outperform rating on the stock with target price of `297 (earlier `307). At our target price stock would trade at 5.0xFY13E conso EV/EBIDTA and 4.5xFY14E conso EV/EBIDTA.