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