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MOSL: TATA MOTORS (Buy)-Below est.; JLR marred by external events; S/A continues to deliver

Tata Motors: Below est.; JLR marred by external events; S/A continues to deliver

(TTMT IN, Mkt Cap USD12.2b, CMP INR264, TP INR360, 36% Upside, Buy)

 

• sales increased 15% YoY to INR671b (est. of INR691b). TTMT reported a net loss of INR19b (est. of PAT of INR8.5b) v/s adj. PAT of ~INR9.7 in 1QFY18 and ~INR31.3b in 4QFY18.
• JLR - records all-time low margins: Net sales fell ~7% YoY to GBP5.2b, as volumes (ex JV) declined ~8% YoY. Realization grew 1.1% YoY (+3.1% QoQ), led by favorable spot FX and a better mix. EBITDA margin shrank 170bp YoY (-730bp QoQ) to 6.2% (est. of 10.4%), impacted by (a) China duty change leading to lower sales and higher variable marketing expense (GBP110m), (b) higher staff cost and (c) negative operating leverage. JLR reported a loss (GBP210m v/s est. of PAT of GBP88m) for the first time since FY10.
• S/A - solid performance in CV; PV near EBITDA break-even: Revenue increased ~85% YoY to INR168b (est. of INR164.5b), led by volume/realization growth of 61.4%/14.5% YoY. EBITDA margin expanded 260bp YoY (+910bp QoQ) to 9.3% (est. of 7.1%), driven by healthy CV profitability (EBITDA margin at 11.7%) and near EBITDA break-even margin in the PV business of -0.7% (v/s -19.7% in 1QFY18).
• Earnings call highlights: (a) Expects higher sales growth and improved profitability in remainder of FY19 due to receding impact of one-offs.( b) Structural impact on margins in China JV (as reflected in 1QFY19 EBIT margin contraction of ~17.5pp YoY/QoQ) due to a price cut, led by lower import duty (as JV product pricing is pegged to imports). (c) Expect some impact of de-stocking in 2QFY19 as well. (d) I-Pace order book is at 5.5 months and PHEV RR/RR Sport order book at 3-4 months.