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Tata Motors Healthy product pipeline

August 12, 2015 by shekarm

JLR: Healthy product pipeline, China JV to pick up soon

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Tata Motors’ standalone revenue grew by 21% YoY to INR 92.9bn due to better product mix (higher sales of M&HCV). Consolidated revenue declined 6% YoY to INR 610.2bn; net profit declined 48.7%YoY to INR 27.7bn due to lower margin and higher interest cost.

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Standalone business reported positive EBITDA of INR 3.5 bn led by sharp 110 bps QoQ increase in gross margin and operating leverage benefits.  Consolidated EBITDA margin of 16.1% surprised positively. JLR EBIDTA margin contracted by 390 bps YoY to 16.4% led by decline in volumes  amidst less favorable model mix/ geography mix, increase in other expenses due to ramp up of new models & underutilized engine facility.

Valuation: With anticipated recovery of domestic CV market, slew of new product launches and sustained momentum in JLR business, we continue to maintain a positive stance on the long term prospects of the stock. We assign a P/E of 7X on FY17E consol consensus estimates and revise our target price to INR 463 and maintain our OUTPERFORMER recommendation on the stock.

 

Risks:  Significant slowdown in China, delayed revival in demand, high interest rates, commodity prices.

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