X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Tata Motors: JLR fuels growth again - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Tata Motors: JLR fuels growth again
Nov 19, 2012

Tata Motors announced its results for the quarter ended September 2012 recently. The company reported a 20% YoY increase in revenues, while net profits increased by 11% YoY. Here is our analysis of the results.

Performance summary
  • Net sales grow by 20% YoY during the quarter led by stronger performance of Jaguar Land Rover.
  • Operating profits increase by 18% YoY as margins contract by 0.1% YoY to 12.3%.
  • Higher interest costs and tax expenses lower Tata Motor's profit growth for the quarter to 11% YoY.

Consolidated financial performance
(Rs m) 2QFY12 2QFY13 Change 1HFY12 1HFY13 Change
Net sales 361,975 434,029 19.9% 694,863 867,265 24.8%
Expenditure 316,936 380,693 20.1% 607,466 756,380 24.5%
Operating profit (EBDITA) 45,039 53,336 18.4% 87,398 110,885 26.9%
EBDITA margin (%) 12.4% 12.3%   12.6% 12.8%  
Other income 1,699 2,068 21.7% 3,357 4,454 32.7%
Finance costs 6,341 8,474 33.6% 14,897 16,517 10.9%
Depreciation 13,308 15,944 19.8% 24,740 31,603 27.7%
Exceptional items (4,390) (101)   (4,960) (4,506)  
Profit before tax 22,700 30,886 36.1% 46,158 62,713 35.9%
Tax 3,630 9,876 172.0% 7,150 18,565 159.7%
Profit after tax/(loss) 19,069 21,010 10.2% 39,008 44,148 13.2%
Share of profits of associates 40 (32)   136 (445)  
Minority interest (335) (230)   (374) (507)  
Net profit after taxes 18,773 20,747 10.5% 38,770 43,196 11.4%
Net profit margin (%) 5.2% 4.8%   5.6% 5.0%  
No. of shares (m)         3,190  
Diluted earnings per share (Rs)*         46.2  
Price to earnings ratio (x)*         5.8  
(* On a trailing 12-month basis, adjusted for extraordinary items)

What has driven performance in 2QFY13?
  • Tata Motors reported a revenue growth of 20% YoY. While sales from the company's standalone business declined by 3% YoY, higher sales of the Jaguar Land Rover business helped pull the overall consolidated revenues up. As per the company, weak macroeconomic parameters, sluggish industrial demand, and diesel price hikes resulted in pressure on volumes in the M&HCV segment (which forms a huge chunk of the sales volumes), thereby impacting the standalone business.

    Commercial vehicles sales for the quarter stood at 136,353 units, higher by a mere 5% YoY. This was largely led by the 18% YoY growth in LCVs, as volumes of MHCVs dropped by 15% YoY. At the end of the quarter, the company's market share in commercial vehicles space stood at 59.7%. Tata Motors' passenger car sales in the domestic market (including Fiat and Jaguar Land Rover vehicles) stood at 72,603 units (up by about 12% YoY). The company's market share in this space improved to 12.3% especially in the compact and UV segments.

    As for JLR's global sales, the same grew by 14% YoY to 77,442 units, largely led by Range Rover Evoque and Range Rover Sport. JLR business revenues grew by 35% YoY during the quarter. In terms of geographies, China continued to grow strongly accounting for 21% of wholesale volumes (as against 16% in 2QFY12).

    Segmental performance (Consolidated)
    (Rs m) 2QFY12 2QFY13 Change 1HFY12 1HFY13 Change
    Tata and other brands* 142,651 137,730 -3% 274,081 256,233 -7%
    % of sales 39% 32%   39% 29%  
    PBIT 6,851 7,415 8% 18,006 15,022 -17%
    PBIT margins 4.8% 5.4%   6.6% 5.9%  
    Jaguar and Land Rover 217,074 293,711 35% 415,850 605,807 46%
    % of sales 60% 67%   60% 69%  
    PBIT 22,416 29,337 31% 43,788 62,934 44%
    PBIT margins 10.3% 10.0%   10.5% 10.4%  
    Others 4,565 5,480 20% 8,561 10,776 26%
    % of sales 1% 1%   1% 1%  
    Total# 364,290 436,921 20% 698,492 872,816 25%
    *Includes vehicles / spares and financing thereof; #Excludes inter segment revenues

  • Tata Motors' consolidated operating profits grew by 18% YoY as operating margins remained stable at 12.3%. While raw material costs during the quarter fell by 2.8% to 63.9% of sales, there was an increase in staff costs, product development expenses and other expenditure (all as a percentage of sales).

    Cost break-up...
    (Rs m) 2QFY12 2QFY13 Change 1HFY12 1HFY13 Change
    Raw materials/ purchases 241,388 277,213 14.8% 460,741 554,706 20.4%
    % sales 66.7% 63.9%   66.3% 64.0%  
    Staff cost 28,656 40,191 40.3% 54,580 78,088 43.1%
    % sales 7.9% 9.3%   7.9% 9.0%  
    Product development expenses 3,115 5,274 69.3% 5,589 10,072 80.2%
    % sales 0.9% 1.2%   0.8% 1.2%  
    Other expenditure* 43,777 58,015 32.5% 86,556 113,515 31.1%
    % sales 12.1% 13.4%   12.5% 13.1%  
    Total expenditure 316,936 380,693 20.1% 607,466 756,380 24.5%
    *Including amount capitalized

  • Tata Motors' net profits increased by 11% YoY. This growth was lower than the growth in operating profits on account of higher interest costs and tax expenses. Further, there was an extraordinary expense of Rs 4.3 bn in 2QFY12. Excluding that and the expense of Rs 101 m in 2QFY13, net profits fell by 10% YoY.

What to expect?
At the current price of Rs 266, the stock trades at a multiple of 13.9 times our estimated FY15 cash flow per share on a standalone basis. Going forward, demand could be impacted by slower industrial growth and a weak economic outlook. The company has observed demand pressure for MHCVs but LCVs are expected to grow at a healthy pace. On the passenger vehicles front, headwinds will continue to exist in the form of intense competition, fuel price increases and increasing costs. The company expects customer preference to continue for diesel vehicles. Overall, the company intends to launch new products both in the CV and passenger vehicles space. As far as JLR is concerned, focus will be on investments in future capacities, new products and technologies. The company has outlined a capex of about GBP 2 bn in FY13 for JLR. Overall, we have a 'Sell' view on the stock.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

TATA MOTORS SHARE PRICE


Feb 21, 2018 (Close)

TRACK TATA MOTORS

  • Track your investment in TATA MOTORS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

TATA MOTORS 8-QTR ANALYSIS

COMPARE TATA MOTORS WITH

MARKET STATS