>TATA MOTORS : Land Rover registers 7.8% decline, Jaguar declines by 11.2% YoY (MOTILAL OSWAL)

Land Rover registers 7.8% decline, Jaguar declines by 11.2% YoY

 JLR Sep-14 sales declined by 8.4% YoY (+3.8% MoM) to 32,858 units (est. 38,256 units), driven by decline in both Land Rover and Jaguar.

 Our interaction with management indicates healthy demand environment. Decline in sales have been primarily due to production constraints on account of transition to upcoming launches of Jaguar XE, Discovery Sport and start of China JV in 4QFY15.

 Land Rover declined by 7.8% YoY to 27,143 units (est. 31,497 units), while Jaguar declined by 11.2% YoY to 5,715 units (est. 6,760 units).

 As per the regional retail sales performance data released, China grew at the highest rate of 25.3% YoY. The UK and Europe grew by 9.3% and 21.1% YoY respectively, while the AsiaPacific grew by 24.5%. All major markets registered growth, except US and RoW which declined by 12.3% and 2.5% respectively.

 Commenting on the September performance Andy Goss, Jaguar Land Rover Group Sales Operations Director said: "Jaguar Land Rover has delivered continued solid growth in September. Our investment in new products continues with the debut of the Land Rover Discovery Sport and the Jaguar XE this month, giving us a very strong, desirable range of products appealing to more customers than ever before - and many more new models in the pipeline."

Valuation and view

 We believe JLR is on the strategic path and is investing in the right areas, resulting in its evolution as a much stronger and balanced player in the luxury vehicle market.

 Domestic business is expected to bounce back strongly along with an economic recovery and favorable product lifecycle in the PV division.

 The stock trades at 7.7x/5.7x FY15E/FY16E consolidated EPS.

 Maintain Buy with a target price of INR620 (FY16E SOTP-based) for ordinary shares and INR372 for DVR (~40% discount to the target price for ordinary shares).

RISH TRADER

> Grasim Industries: RESULTS REVIEW 2QFY15 (HDFC Securities)

Softer pulp drives VSF margins

Grasim Industries’ standalone numbers were inline (EBITDA Rs 2.1n vs. est 2.2bn). New capacities continue to drive volume growth (101kt, +9% YoY). Standalone margins improved in 2Q, led by weakening RM costs on account of cheaper pulp (VSF PBIDT/kg : Rs 15/kg). Realisations held on at roughly same levels QoQ (Rs 125/kg), despite softening in global VSF pricing. Chinese cotton unwinding, which has driven cotton pricing downwards, has not effected VSF globally and the prices are at par with cotton for 1st time since FY13.

Trial runs for the remaining VSF capacity at Vilayat (43 ktpa specialty fibre) are underway and the new capacity should further boost volumes in FY16 (FY15 end capacity 490 ktpa). Thus Grasim is well set to reap the benefits of any demand revival in VSF globally, whenever that happens. We have a BUY on the stock with a revised TP of Rs 3,850 (UltraTech stake at 20% holding company discount, standalone business at 5.0x FY16E EV/EBITDA).

 2QFY15 highlights : Consolidated EBITDA was ahead of estimates driven by UltraTech surprise (EBITDA at Rs 8.3 bn vs Est 7.3 bn). Despite robust revenue growth (16.0% YoY), EBITDA growth was restrained due to weakness in VSF (Stlone. EBITDA down 22.8% YoY). JPA acquisition by UltraTech and higher debt led to 44% YoY higher interest cost. Combined with higher depreciation on account of new commissioning, APAT was down ~12%. In Parent entity, chemicals business continues to do well despite realisation decline (EBITDA margins at 23%) due to higher imports. This is driven by ramp-ups at Vilayat caustic plant and the epoxy facility.

 Outlook and view : We have tweaked our estimates marginally (EBITDA -6.2%/-2.2% for FY15/16), mainly on account of revision in UltraTech nos. Despite correction recently, UltraTech continues to trade at rich valuations (12.0x FY16 EV/EBITDA) with an added overhang of a likely acquisition overseas. Grasim remains undervalued, even on our target valuation for UltraTech (Rs 1,960/sh), and is preferable for an exposure to the cement business. Holding company discount should reduce as VSF prospects improve.

RISH TRADER

>MARUTI SUZUKI LIMITED (SHAREKHAN)

Outlook positive, maintain Buy with a revised price target of Rs3,600

Maruti Suzuki India (Maruti) posted an impressive volume growth of 16.8% in Q2FY2015. A favourable currency impact aided in a 68BPS sequential expansion in OPM to 12.4%. A fall in the tax rate to 20.2% as against 24% in the previous quarter resulted in a 28.7% Y-o-Y increase in the net profit to Rs863 crore as against our estimate of Rs784 crore.

Maruti’s management has maintained its guidance of a 10% volume growth for FY2015 and reiterated that the discount push was necessary to sustain the current trend which remains unstable. The urban volume growing at 10% is the key positive and a sign of better times ahead for the industry. Maruti meanwhile continues to consolidate its leadership position with its market share touching a four-year high of 45.2%. A spate of new launches coupled with refreshes to the current line-up is targeted at further consolidating the pole position.

We have tweaked our volume estimates for FY2016 and FY2017 given the deferment of the launch of XA-Alfa in FY2017 instead of FY2016 earlier. We have also reduced our tax rate estimate given the lower rates for the quarter and further benefit due to the expenditure on research and development. Consequently, earnings estimates for FY2015-16 are marginally higher, while FY2017 earnings estimates have been raised by 4.6% given the dual benefit of higher volume and lower tax rate. We continue to remain positive on the stock and reiterate a Buy recommendation with a revised price target of Rs3,600 (earlier Rs3,500) discounting FY2017E EBITDA 10x.

RISH TRADER

>Just Dial Limited: 2QFY15 RESULTS REVIEW (ANTIQUE)

Stable quarter; Expansion plans to weigh on margins, Hold

Just Dial's 2QFY15 revenues grew 31% YoY to INR1.5bn, ~8% below our estimate. Increase in revenues was on the back of healthy growth in paid campaigns, which grew 6.5% sequentially to 296,100, and increased realisations per paid campaign. EBITDA came in at INR426m, in line with

our estimate. Margins declined 237bps YoY to 29% for the quarter, due to a one-off expense of INR32m towards employee stock options. Adjusting for this one-off, margins remained flat YoY. EBITDA margins were ~200bps higher than our estimate, led by lower-than-anticipated one-offs and higher estimated revenue base for the quarter. PAT came in at INR315m versus our estimate of INR366m, led by lower other income (INR85m). Listings increased 44% YoY to 14.5m. Search Plus currently offers 20 live services. However, most are on a trial basis and are yet to be monetised. We expect Search Plus to start contributing from FY16e and meaningfully from FY17e. Cash and investments stood at INR7.4bn as on 2QFY15 vs INR5.7bn as on 2QFY14. The board of directors recently approved a resolution to raise INR10bn to plough in inorganic expansion opportunities. The company has pushed its mass communication campaign for Search Plus Services to 4Q. The stock

trades at 55x FY16e earnings, which is rich in our view. We maintain our estimates for FY15e and FY16e and retain our Hold rating on the stock with a target price of INR1,650 per share.

Revenues grow 31%, margins better-than-estimated

2QFY15 revenues grew 31% YoY to INR1.5bn. However, the same was below our estimate as we factored in higher monetisation of the 2.3m business listings acquired last quarter. Growth in revenues was underpinned by: 1) Healthy uptick in paid campaigns, which grew 6.5% sequentially; and 2) Increased realisations per paid campaign. Margins were weighed down 237bps YoY to 29%, led by an INR32m one-off spend towards employee stock options. Adjusting for one-offs, EBITDA margins were flat YoY and better-than-expected as there was no one-off spend towards advertising on Search Plus Services as anticipated earlier. Margins are expected to remain subdued this fiscal on account of increased advertising spends and expansion-related investments.

Lower-than-expected paid campaigns

Paid campaigns for 2Q, though healthy, were lower than our estimate. It continues to comprise only ~2% of business listings vs 2.4% in 2QFY14. Listings remained soft and grew 3% sequentially to 14.5m during 2Q. Growth in business listings continues to outpace growth in paid campaigns, signalling conversions are increasingly hard to come by.

Fund raising on the anvil

The board of directors recently approved an enabling resolution to raise up to INR10bn. The management is presently looking at organic and inorganic expansions in international markets like the UK, US, Canada, and other emerging markets. These markets are highly competitive and regulated, thereby increasing uncertainty. Any meaningful inroads would entail significant investments and drag margins lower.

Valuations and outlook

The stock trades at 55x FY16e for 31% earnings CAGR over FY14-16e. We find valuations rich and maintain our earnings estimate for FY15e and FY16e. We retain our Hold rating on the stock, as the upside from current levels is limited, growth in paid campaigns tapering off, and increased capital/operating expenditure that would be required to enter new geographies.

RISH TRADER