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IIFL Institutional Equities recommends 'Reduce' on Tata Motors

India Infoline News Service | Mumbai | February 15, 2013 18:09 IST

Tata Motors’ 3Q consolidated Ebitda declined 15% YoY but came in line with our estimate

IIFL Institutional Equities, a part of the IIFL Group, one of the leading players in the Indian financial services space, recommends “Reduce” Tata Motors.


According to IIFL Institutional Equities report, Tata Motors’ 3Q consolidated Ebitda declined 15% YoY but came in line with our estimate. Higher-than-expected JLR earnings (vs. lowered estimates post profit warning) were offset by significant deterioration in the standalone business. PAT missed our estimate by 17% due to higher depreciation, interest, and tax.


JLR performance: ASP declined 5.5% QoQ on a weak mix (may reverse partially). Ebitda came in at the top-end of the range indicated in the profit warning. Ebitda margin came in higher at 14.0% (est. 12.4%), due to lower than expected revenues.


Standalone performance: Ebitda margin declined to 2.2% (est. 5.5%), resulting in Ebitda missing our est. by 60%. The business incurred a loss of Rs4.5bn vs. our estimate of Rs1.4bn loss.


We increase Ebitda estimates for JLR by 3-5% on higher volumes. This is entirely offset by a cut in standalone estimates. Our consolidated Ebitda/EPS remains largely unchanged. We increase our TP to Rs305 as we rollover to FY15-based valuations – 3.5x EV/Ebitda for JLR (earlier 3.0x) and 6.5x EV/Ebitda for the standalone business, the brokerage added.


The report was published by IIFL’s Institutional Equities Research desk.

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