MOSL: TATA MOTORS (Buy)-Below est-JLR performance weak, while S/A biz continues to improve
Tata Motors: Below est; JLR performance weak, while S/A biz continues to improve
(TTMT IN, Mkt Cap USD21.0b, CMP INR396, TP INR515, 30% Upside, Buy)
- revenue grew 16% YoY to INR741.6b. EBITDA rose 37% YoY to INR85.4b (est. of INR94.6b). Higher tax further dragged adj. PAT to INR11.4b (est. of INR26.7b; 2QFY18: INR24.4b; 3QFY17: INR2.2b loss).
- JLR – unfavorable mix, high incentives dent EBITDA: Net sales at GBP6.3b (in-line) grew 4.3% YoY. Weaker product mix due to RR/RR Sports run-down and higher incentives led to ~2% QoQ decline in realizations. As a result, EBITDA margin shrunk 90bp QoQ (+80bp YoY) to 10.9% (est. of 12.4%). Further lower share of China JV PAT, higher depreciation and tax restricted adj. PAT to GBP89m (est. of GBP294m; -20% YoY, -71% QoQ).
- S/A – Better mix, price hike and cost reduction propel turnaround: Revenues grew 58% YoY (+16% QoQ) to INR161b (est. of INR156b), led by volume/realization growth of 29%/22% YoY. EBITDA margin came in at 8.6% (est. of 8%), up 720bp YoY (+160bp QoQ), driven by better mix, cost-reduction initiatives and operating leverage. As a result, S/A turned PAT positive (at INR1.9b v/s est. of INR1.3b).
- Earnings call highlights: a) For JLR, it highlighted increasing challenges in demand environment in key markets. b) Expects 4QFY18 to be substantially better than 3QFY18. c) Reiterated EBIT margin target of 8-10% in medium term, led by volume growth, cost efficiencies and control on fixed cost, despite adverse FX movement. d) Aluminum cost inflation yet to be reflected in P&L due to hedges. e) CV business has capacity constraints (at suppliers end) due to strong tailwinds. f) Targets PV business breakeven at PBT level and S/A EBIT margin of 6-8% (3QFY18: 3.8%).
Tata Motors is an automobile company, engaged in the manufacture and sale of commercial and passenger vehicles primarily in India. Co. provides cars, utility vehicles, trucks, buses, and defense vehicles, as well as develops electric and hybrid vehicles for personal and public transportation. In addition, Co. is engaged in the provision of engineering and automotive applications, as well as machine tools and factory automation applications; construction equipment manufacturing; automotive vehicle components manufacturing, among others. Co. markets its vehicles in Europe, Africa, the Middle East, South East Asia, South Asia, and South America.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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