CMP Rs239, Target Rs250, Upside 4.4%
On a standalone basis, Tata Motors reported a revenue decline of 8.9% yoy to Rs106bn on the back of 3.6% fall in volumes and 5.5% fall in realizations. Fall in volumes was driven by sharp decline in M&HCV and passenger car segments which was offset by decent growth in LCV volumes. Decrease in realizations was owing to the decline in proportion of M&HCV sales in total volumes.
We downgrade our rating on Tata Motors from BUY to Market Performer on the back of 1) lower margins for JLR as guided by the management, 2) near term slowdown in volumes for JLR as the production of old Range Rover is discontinued, 3) higher tax rate at JLR and 4) marked slowdown in domestic CV volumes. We expect the consolidated profit to decline by 19% yoy in FY13E. We revise our 9-month target price from Rs309 to Rs250.