tata motors, 1q fy 2014

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Please refer to important disclosures at the end of this report 1

Y/E March (consolidated ` cr) 1QFY14 1QFY13 % chg (yoy) 4QFY13 % chg (qoq)Net sales 46,785 43,324 8.0 56,002 (16.5)EBITDA 6,219 5,755 8.1 7,802 (20.3)

EBITDA margin (%) 13.3 13.3 1bp 13.9 (64)bp

Adjusted PAT 1,905 2,685 (29.1) 3,924 (51.5)Source: Company, Angel Research

Another strong performance by JLR: Tata Motors (TTMT) reported an in-lineoperating performance for 1QFY2014 with Jaguar and Land Rover (JLR) onceagain registering a robust performance. JLR witnessed a strong margin expansionof 200bp yoy to 16.5% on the back of superior product and geography mix,favorable currency impact and also due to softening of the commodity prices.Nonetheless, the adjusted bottom-line at `1,905cr was significantly lower thanour estimate of `2,683cr, owing to increase in interest (up 17.9% yoy) anddepreciation expense (up 49.9% yoy) and also due to significantly higher tax-rate(39.8% as against 27.3% in 1QFY2013). The standalone performance continuedits dismal run as volume and margin pressures persisted, resulting in an adjustedbottom-line (adjusted for dividend income from JLR) loss of over `400cr, higherthan our expectations of a loss of `270cr.

The consolidated top-line registered a healthy growth of 8% yoy to `46,785cr,in-line with our estimates of `46,989cr, driven by a strong top-line growth of13.3% yoy at JLR (INR terms). The JLR performance was led by a healthy volumeand net average realization growth of 8.6% yoy and 4.4% yoy respectively. TheJLR volume growth was primarily driven byJaguar models (up 57.8% yoy) on the

back of new launches (F-type and AWD and smaller engine options forXF andXJand XF Sportbrake). Land Rover sales however, remained flat yoy and wereimpacted mainly due to the phasing out of the old Range Rover Sport ahead ofthe introduction of the new Range Rover Sport. The standalone top-line posted asignificant decline of 14% yoy following an 18.9% yoy decline in volumes.

Outlook and valuation: We expect headwinds in the standalone business tocontinue in FY2014 due to weak macro-economic environment which is expectedto continue impacting domestic volumes. Nevertheless, we expect JLR to sustain itsstrong performance driven by continued momentum in the global luxury vehiclemarket and aided further by the strong product launch pipeline and the success ofthe model launched in 4QFY2013. We expect JLR volumes to grow at ~13%CAGR during FY2013-15E and PAT to grow at ~15% CAGR during the sameperiod. We retain our positive view and Buy rating on the stock with an SOTPbased target price of `355.Key financials (Consolidated)Y/E March (` cr) FY2012 FY2013 FY2014E FY2015ENet Sales 165,654 188,818 215,043 240,077% chg 35.6 14.0 13.9 11.6

Net Profit 11,497 10,495 12,461 14,199% chg 27.1 (8.7) 18.7 13.9

EBITDA (%) 13.5 13.0 13.5 13.7

EPS (`) 36.2 32.9 38.7 44.1P/E (x) 7.7 8.5 7.2 6.3

Adjusted P/E (x)* 9.8 11.2 9.3 8.2

P/BV (x) 2.7 2.4 1.8 1.4

RoE (%) 44.3 29.8 28.5 25.1RoCE (%) 24.5 20.1 21.0 20.8

EV/Sales (x) 0.6 0.5 0.5 0.4

EV/EBITDA (x) 4.5 4.2 3.5 3.1

Source: Company, Angel Research; Note: * adjusted for R&D spends at JLR, expensed at 80%,in-line with global peers, as against companys current rate of 15-20%

BUYCMP `279

Target Price `355

Investment Period 12 Months

Stock Info

Sector

Net Debt (` cr)

Bloomberg Code

Shareholding Pattern (%)

Promoters 34.4

MF / Banks / Indian Fls 12.1

FII / NRIs / OCBs 46.2

Indian Public / Others 7.3

Abs. (%) 3m 1yr 3yr

Sensex (6.2) 6.0 2.9

Tata Motors (6.6) 16.8 56.0

TTMT@IN

Face Value (`)

BSE Sensex

Nifty

Reuters Code

Automobile

Avg. Daily Volume

Market Cap (` cr)

Beta

52 Week High / Low

18,665

5,519

TAMO.BO

89,751

1.2

337/224

1,049,472

2

15,067

Yaresh Kothari022-3935 7800 Ext: 6844

[email protected]

Tata MotorsPerformance Highlights

1QFY2014 Result Update | Automobile

August 8, 2013

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Tata Motors | 1QFY2014 Result Update

August 8, 2013 2

Exhibit 1:Quarterly financial performance (Standalone)Y/E March (` cr) 1QFY14 1QFY13 % chg (yoy) 4QFY13 % chg (qoq) FY2013 FY2012 % chg (yoy)Net Sales 9,105 10,586 (14.0) 11,068 (17.7) 44,766 54,307 (17.6)Consumption of RM 5,418 5,835 (7.1) 6,587 (17.7) 27,101 33,271 (18.5)(% of Sales) 59.5 55.1 59.5 60.5 61.3

Staff Costs 747 707 5.7 650 15.1 2,837 2,691 5.4

(% of Sales) 8.2 6.7 5.9 6.3 5.0

Purchases of TG 1,192 1,598 (25.4) 1,663 (28.3) 5,864 6,434 (8.9)

(% of Sales) 13.1 15.1 15.0 13.1 11.8

Other Expenses 1,641 1,747 (6.0) 1,949 (15.8) 7,246 7,733 (6.3)

(% of Sales) 18.0 16.5 17.6 16.2 14.2

Total Expenditure 8,999 9,887 (9.0) 10,848 (17.0) 43,048 50,129 (14.1)Operating Profit 105 700 (85.0) 219 (52.0) 1,718 4,178 (58.9)OPM (%) 1.2 6.6 2.0 3.8 7.7

Interest 319 319 (0.2) 334 (4.6) 1,388 1,219 13.9

Depreciation 500 429 16.4 459 8.9 1,818 1,607 13.1

Other Income 1,621 447 262.5 90 1,700.2 2,088 574 263.7

PBT (excl. Extr. Items) 907 398 127.8 (483) (287.8) 601 1,926 (68.8)Extr. Income/(Expense) 154 161 - 2 7,931 426 585 -

PBT (incl. Extr. Items) 753 237 217.4 (485) (255.2) 175 1,341 (87.0)(% of Sales) 8.3 2.2 (4.4) 0.4 2.5

Provision for Taxation 50 32 56.3 (173) (128.9) (127) 99 (228.4)

(% of PBT) 6.6 13.5 35.7 (81.4) (72.5) 7.4

Reported PAT 703 205 242.5 (312) (325.3) 302 1,242 (75.7)Adj PAT 857 366 134.1 (310) (376.4) 728 1,827 (60.2)

Adj. PATM 9.4 3.5 (2.8) 1.6 3.4

Equity capital (cr) 643.8 638.0 638.1 638.1 634.8

Reported EPS (`) 2.7 1.1 132.0 (1.0) (373.9) 2.3 5.8 (60.4)Source: Company, Angel Research

Exhibit 2:1QFY2014 Actual vs Angel estimates - StandaloneY/E March (` cr) Actual Estimates Variation (%)Net Sales 9,105 8,782 3.7EBITDA 105 245 (57.1)

EBITDA margin (%) 1.2 2.8 (164)bp

Adj. PAT 857 (270) -Source: Company, Angel Research

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August 8, 2013 3

Exhibit 3:Quarterly volume performanceY/E March (units) 1QFY14 1QFY13 % chg (yoy) 4QFY13 % chg (qoq) FY2013 FY2012 % chg (yoy)M&HCV 32,997 37,151 (11.2) 36,171 (8.8) 152,505 221,297 (31.1)

LCV 83,500 89,483 (6.7) 120,274 (30.6) 428,643 363,890 17.8Total Commercial Vehicles 116,497 126,634 (8.0) 156,445 (25.5) 581,148 585,187 (0.7)Utility Vehicles 7,216 11,168 (35.4) 10,611 (32.0) 48,583 56,138 (13.5)

Cars 29,459 50,972 (42.2) 29,314 0.5 180,355 265,254 (32.0)

Total Passenger Vehicles 36,675 62,140 (41.0) 39,925 (8.1) 228,938 321,392 (28.8)Exports (Inc Above ) 11,435 13,071 (12.5) 11,428 0.1 50,831 63,078 (19.4)

Total Sales 153,172 188,774 (18.9) 196,370 (22.0) 810,086 906,579 (10.6)Source: Company, Angel Research

Standalone performance continues to disappoint: The standalone businesscontinued reporting disappointing performance on account of sharp decline of

18.9% yoy in volumes. This coupled with higher levels of discounts and marketingspends and lower utilization levels resulted in the EBITDA margin collapsing to

1.2% leading to an 85% fall in operating profit. The standalone adjusted

bottom-line stood at `857cr primarily due to higher other income which came in at

`1,621cr (as against `447cr in 1QFY2013) boosted by dividend income of

150mn from JLR. However, adjusting for the JLR dividend income, the standalone

adjusted bottom-line posted a loss of over `400cr, higher than our expectation of

a loss of `270cr.

Exhibit 4:Weakness in volumes persists

Source: Company, Angel Research

Exhibit 5:Net average realization up 5.9% yoy


The standalone top-line posted a significant decline of 14% yoy to `9,105cr due to

an 18.9% yoy decline in volumes. The net average realization however improved

5.9% yoy, primarily due to a better product-mix in favor of medium and heavy

commercial vehicles (MHCV). The standalone volumes were impacted due to a

41% yoy decline in passenger vehicle (PV) volumes following increased competition

and 8% yoy decline in commercial vehicle (CV) volumes led by slowdown in

economic activity.

The Management has indicated that the outlook for MHCV volumes remains bleak

and expects them to recover only once the economic environment in the countryimproves. The Management highlighted that wholesale volumes were significantly

lower than retail volumes in CV and PV segments during the quarter as the

company aligned the inventory levels in-line with market demand.

192,8

48

206,6

22

227,1

10

280,0

00

188,7

74

221,0

90

203,8

52

196,3

70

153,1

72

6.1 4.1

21.618.5

(2.1)

7.0

(10.2)(29.9) (18.9)

(40.0)

(30.0)

(20.0)

(10.0)

0.0

10.0

20.0

30.0

0

50,000

100,000

150,000

200,000

250,000

300,000

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(units) Total volume yoy growth (RHS)

599,4

07

623,6

60

583,9

75

582,0

40

556,7

84

560,6

97

516,4

85

556,9

73

589,9

00

5.2

8.1

(4.8) (5.4)(7.1) (10.1) (11.6)

(4.3)

5.9

(15.0)

(10.0)

(5.0)

0.0

5.0

10.0

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(`) Net average realisation/unit yoy growth (RHS)

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August 8, 2013 4

Exhibit 6:EBITDA margin remains at low levels


Exhibit 7:Bottom-line aided by JLR dividend


Exhibit 8:Quarterly performance (Consolidated)Y/E March (` cr) 1QFY14 1QFY13 % chg (yoy) 4QFY13 % chg (qoq) FY2013 FY2012 % chg (yoy)Net Sales 46,785 43,324 8.0 56,002 (16.5) 188,818 165,654 14.0Consumption of RM 26,746 24,835 7.7 32,090 (16.7) 108,569 98,262 10.5

(% of Sales) 57.2 57.3 57.3 57.5 59.3

Staff Costs 4,461 3,790 17.7 4,422 0.9 16,584 12,298 34.8

(% of Sales) 9.5 8.7 7.9 8.8 7.4

Purchase of Goods 2,139 2,914 (26.6) 3,089 (30.7) 11,752 11,206 4.9

(% of Sales) 4.6 6.7 5.5 6.2 6.8

Other Expenses 7,219 6,030 19.7 8,599 (16.0) 27,365 21,577 26.8

(% of Sales) 15.4 13.9 15.4 14.5 13.0

Total Expenditure 40,565 37,569 8.0 48,200 (15.8) 164,270 143,343 14.6EBITDA 6,219 5,755 8.1 7,802 (20.3) 24,547 22,311 10.0EBITDA margin (%) 13.3 13.3 13.9 13.0 13.5

Interest 948 804 17.9 967 (1.9) 3,553 2,982 19.2

Depreciation 2,348 1,566 49.9 2,339 0.4 7,569 5,625 34.6

Other Income 182 239 (23.6) 177 2.7 812 662 22.6

PBT (excl. Extr. Items) 3,106 3,623 (14.3) 4,673 (33.5) 14,236 14,365 (0.9)Exceptional Items 179 441 (21) 603 832

PBT (incl. Extr. Items) 2,927 3,183 (8.0) 4,694 (37.6) 13,633 13,534 0.7(% of Sales) 6.3 7.3 8.4 7.2 8.2

Provision for Taxation 1,164 869 34.0 883 31.9 3,771 2,811 34.2

(% of PBT) 39.8 27.3 18.8 111.5 27.7 20.8

PAT 1,763 2,314 (23.8) 3,812 (53.8) 9,862 10,723 (8.0)PATM 3.8 5.3 6.8 5.2 6.5

Minority Interest 20 28 (28.3) 18 11.1 84 82 1.6

Associate Companies Profit (17) (41) (59.1) 152 (111.2) 114 25 356.6

PAT after MI 1,726 2,245 (23.1) 3,945 (56.3) 9,893 10,666 (7.2)Adjusted PAT 1,905 2,685 (29.1) 3,924 (51.5) 10,495 11,497 (8.7)Equity shares (cr) 643.8 638.0 638.1 638.1 638.0

Reported EPS (`) 5.4 7.0 (23.8) 12.4 (56.6) 31.0 33.4 (7.3)Adjusted EPS (`) 5.9 8.4 (29.7) 12.3 (51.9) 32.9 36.0 (8.7)


8.3 6.7 6.4 9.1 6.6 5.21.4 2.0 1.2

71.274.3 74.3 73.9

70.274.8 76.1 74.5 72.6

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%) EBITDA margin Raw material cost/sales

399

396

257 6

95

366

1,1

22

(450)

(324)

857

3.4 3.11.9

4.23.5

9.0

(4.2) (2.9)

9.4

(8.0)

(6.0)

(4.0)

(2.0)

0.0

2.0

4.0

6.08.0

10.0

12.0

(600)

(400)

(200)

0

200

400

600

8001,000

1,200

1,400

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(` cr) Net profit (LHS) Net profit margin (RH S)

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August 8, 2013 5

Exhibit 9:1QFY2014 Actual vs Angel estimates ConsolidatedY/E March (` cr) Actual Estimates Variation (%)Net Sales 46,785 46,989 (0.4)EBITDA 6,219 6,356 (2.2)EBITDA margin (%) 13.3 13.5 (23)bp

Adj. PAT 1,905 2,683 (29.0)Source: Company, Angel Research

JLR steers the consolidated results once again:The consolidated top-line registereda healthy growth of 8% yoy to `46,785cr, in-line with our estimates of `46,989cr,

driven by a strong top-line growth of 13.3% yoy at JLR (INR terms). The JLR

performance was driven by a healthy volume and net average realization growth

of 8.6% yoy and 4.4% yoy respectively. The JLR volume growth was primarily

driven byJaguar (up 57.8% yoy) on the back of the new launches (F-type and

AWD and smaller engine options for XF and XJ and XF Sportbrake). Land Rover

sales however, remained flat yoy and were impacted mainly due to the phasing

out of the old Range Rover Sport ahead of the introduction of the new Range Rover

Sport. The standalone top-line posted a significant decline of 14% yoy following an

18.9% yoy decline in volumes.

Exhibit 10:Top-line growth driven by JLR


On the operating front, the consolidated EBITDA margin stood at 13.3% (flat yoy),

broadly in-line with our estimates of 13.5%. The benefit of softening of commodity

prices was mitigated by sharp increase in staff cost (due to higher pension

expense) and other expenditure (due to higher marketing expenses). The

performance was led by JLR with EBITDA margin at 16.5%, ahead of our

expectations of 15.4% and driven by a richer product-mix and favorable exchange

rate movement. The standalone operations on the other hand continued to witness

margin pressure (down 83bp qoq to 1.2%) on account of increased discounts and

marketing spends in the PV and MHCV businesses and lower utilization levels.

33,2

89

36,1

98

45,2

60

50,9

08

43,3

24

43,4

03

46,0

90

56,0

02

46,7

85

23.025.8

44.0 44.3

30.1

19.9

1.810.0

8.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

0

10,000

20,000

30,000

40,000

50,000

60,000

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(`cr) Net sales (LHS) Net sales growth (RHS)

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August 8, 2013 6

Exhibit 11:EBITDA margin in-line with estimates


Exhibit 12:Adjusted net profit at `1,905cr


The adjusted net profit declined 29.1% yoy despite an 8.1% increase in operatingprofit primarily due to increase in depreciation and interest expense and also due

to a higher tax-rate. JLRs bottom-line grew strongly by 28.9% yoy to 304mn

driven by strong operating performance which although was partially offset by

higher depreciation expense (due to amortization of the expenses for the newly

launched models) as well as higher finance expense. The standalone adjusted

bottom-line stood at `857cr aided by other income of `1,621cr (as against `447cr

in 1QFY2013) and dividend income of 150mn from JLR. Adjusting for the JLR

dividend income, the standalone adjusted bottom-line posted a loss of over

`400cr, higher than our expectation of a loss of `270cr.

Exhibit 13:JLR Income statement( mn) 1QFY14 1QFY13 % chg (yoy) 4QFY13 % chg (qoq) FY2013 FY2012 % chg (yoy)Volume (units) 90,620 83,452 8.6 116,340 (22.1) 372,062 314,428 18.3Net realization () 45,211 43,596 3.7 43,433 4.1 42,421 42,972 (1.3)

Net sales 4,097 3,638 12.6 5,053 (18.9) 15,783 13,512 16.8Operating profit 675 527 28.1 856 (21.1) 2,337 1,989 17.5

OPM (%) 16.5 14.5 16.9 14.8 14.7

PBT 415 333 24.7 508 (18.3) 1,676 1,507 11.2PAT 304 236 28.9 378 (19.6) 1,216 1,481 (17.9)


Exhibit 14:1QFY2014 Actual vs Angel estimates JLRY/E March ( mn) Actual Estimates Variation (%)Net Sales 4,097 4,191 (2.2)EBITDA 675 645 4.7

EBITDA margin (%) 16.5 15.4 109bp

Reported PAT 304 330 (7.9)Source: Company, Angel Research

JLR sustains its strong performance: JLR registered a strong revenue growth of12.6% yoy to 4,097mn driven by a healthy volume growth of 8.6% yoy and 3.7%

yoy growth in net average realization. Jaguar volumes grew at an impressive rate

of 57.8% yoy aided by the success of the smaller engine variants of the XF andXJ

12.7 12.4 15.1 13.2 13.3 12.3 12.3 13.9 13.3

66.3 67.2 66.4 66.0 64.1 64.7 64.8 62.8 61.7

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%) EBITDA margin Raw material cost/sales

2,0

57

2,3

16

3,5

70

3,5

55

2,6

85

2,0

85

1,8

01

3,9

24

1,9

05

6.2 6.4

7.9

7.0

6.2

4.8

3.9

7.0

4.1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(%)(`cr) Net profit (LHS) Net profit margin (RHS)

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August 8, 2013 7

andXF Sportbrake. Land Rover volumes on the other hand remained flat yoy due

to phasing out of the old Range Rover Sport. According to the Management, the

initial response to the new Range Rover Sport is positive and is confident of

achieving sales of 60,000 units in FY2014. Geographically, the volume growth in1QFY2014 was driven by UK (~18% of JLR volumes) and Asia Pacific (~7% of JLR

volumes) which registered an outstanding growth of 25.7% yoy and 58.3% yoy

respectively. Europe volumes however, reported a marginal decline of 0.6% yoy.

Exhibit 15:JLRs quarterly performance - Wholesale


Exhibit 16:JLRs performance Wholesale


JLRs EBITDA margin improved 200bp yoy to 16.5%, ahead of our expectations of

15.4%, aided by a richer product and geography mix and also due to favorable

exchange rate movement. Employee expense as a percentage of sales however,increased by 50bp yoy due to higher pension expenses. Other expenditure as a

percentage of sales too increased by 130bp yoy due to higher marketing spends.

As a result, JLR reported a 28.1% yoy growth in operating profit to 675mn. JLRs

bottom-line grew strongly by 28.9% yoy to 304mn driven by strong operating

performance, although the same was partially offset by a higher depreciation

expense as well as higher finance expense. During the quarter, JLR reported a

forex loss of 30mn pertaining to translation charges on foreign denominated

debt.

According to the Management, JLR has not witnessed any inventory buildup in

China and inventory levels in most markets remain under control with averageinventory levels of 30 to 45 days. Further, the Management indicated that variable

incentives for JLR have declined sequentially and are likely to trend downwards

going ahead with the new Range Rover Sport being launched. The company

capitalized 242mn towards R&D expenditure in 1QFY2014, while total R&D

spends stood at 292mn. JLRs capital expenditure for the quarter stood at

266mn. JLR reported negative free cash flow (FCF) of 341mn during the quarter

led by higher capital expenditure and product development costs (amounting to

558mn in total) and also due to unfavorable working capital cycle (seasonal

impact). However, the Management expects working capital to remain flat in

FY2014.

11,343 13,30615,272 14,118 11,774 9,832

15,04321,163 18,577

50,74754,694

71,050

83,903

71,67867,610

79,785

95,177

72,043

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(units) Jaguar Land Rover

-

5,000

10,000

15,000

20,000

25,000

30,000

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

(units) Asia Pacific China Region Europe

North America UK Rest of the world

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August 8, 2013 8

Investment arguments

JLR to register a strong ~13% volume CAGR over FY2013-15E: The globalluxury vehicle market has managed to post a healthy volume growth of ~10%

in FY2013 despite a challenging macro environment. Volumes of the top four

players (Audi, BMW, Mercedez Benz and JLR) continue to hold up well, aided

by strong growth in Asia/Pacific and North America, though the volumes in

China softened in 1QFY2014. We expect JLR to deliver an ~13% volume

CAGR over FY2013-15E on the back of the strong product launches that are

lined up in FY2014 (expected to launch 8 new refreshes/models in FY2014)

and the success of the model launched in 4QFY2013. Additionally, a

favorable market mix (China's contribution increased from 11% in FY2011 to

21% in FY2013) and sourcing from low-cost countries will enable JLR to

maintain its margins in the range of 15-15.5% in FY2014.

Domestic business to remain under pressure: While we expect the commercialvehicle (CV) business to stage a recovery with the revival in the domestic

industrial activity, the PV segment is likely to remain under pressure led by

weak product offerings amid rising competition. Further, led by higher

discounts and promotional expenses, we expect the standalone profitability to

remain under pressure.

Outlook and valuation

We expect headwinds in the standalone business to continue in FY2014 due to

weak macro-economic environment which is expected to continue impacting

domestic volumes. Nevertheless, we expect JLR to sustain its strong performance

driven by continued momentum in the global luxury vehicle market and aided

further by the strong product launch pipeline and the success of the model

launched in 4QFY2013. We revise our earnings estimates upwards for JLR due to

continued strong performance leading to 6-7% upward revision in consolidated

earnings for FY2014/15.

Exhibit 17:Change in estimates (consolidated)Y/E March Earlier estimates Revised estimates % chg

FY2014E FY2015E FY2014E FY2015E FY2014E FY2015ENet sales (` cr) 215,016 237,404 215,043 240,077 0.0 1.1OPM (%) 13.3 13.6 13.5 13.7 25bp 10bp

EPS (`) 36.2 41.5 38.7 44.1 7.0 6.4Source: Company, Angel Research

We expect JLR volumes to grow at ~13% CAGR over FY2013-15E and PAT to

grow at ~15% CAGR during the same period. We retain our positive view and Buy

rating on the stock with an SOTP based target price of `355. We have valued the

standalone business at `33/ share, at 12x FY2015E earnings. We value JLR at

6.5x FY2015E earnings at `292/ share. The embedded value of the subsidiaries

and investments works out to `30/ share.

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August 8, 2013 9

Exhibit 18:SOTP valuationParticulars Parameter Value/ Share (`)Standalone FY2015E (12x P/E) 33

JLR FY2015E (6.5x PAT) 292Key subsidiaries and others 30

Target price 355Source: Company, Angel Research

Exhibit 19:Peer valuation Global luxury car manufacturersP/E (x) P/B (x) EV/EBITDA (x) EV/Sales (x)

FY14E FY15E FY14E FY15E FY14E FY15E FY14E FY15EBMW 9.1 8.8 1.4 1.3 8.2 7.9 1.3 1.3

Daimler 11.5 9.9 1.3 1.2 9.0 9.0 1.1 1.0


Key downside risk to our estimates: Lower-than-expected growth in JLR due touncertainty in key markets (Europe, UK, China and US) will negatively affect our

volume growth estimates. Further, softening of domestic interest rates poses an

upside risk to our domestic volume estimates.

Exhibit 20:Key assumptionsY/E March (units) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015EM&HCV 167,828 209,521 221,298 152,505 154,030 172,514

LCV 233,697 287,462 363,891 428,643 441,502 476,822

Total CV 401,525 496,983 585,189 581,148 595,532 649,336UV 34,124 43,070 56,138 48,583 46,154 53,077

Cars 176,683 192,831 190,728 126,341 120,024 134,427

Nano 30,353 70,432 74,526 54,014 32,408 37,270

Total PV 241,160 306,333 321,392 228,938 198,586 224,773Exports (Inc Above ) 34,140 58,042 62,890 50,831 46,765 53,779

Total volume 642,685 803,316 906,581 810,086 794,119 874,110JLR volume 193,982 243,621 314,433 372,062 424,151 475,049


Exhibit 21:Angel vs consensus forecastAngel estimates Consensus Variation (%)FY14E FY15E FY14E FY15E FY14E FY15E

Total op. income (` cr) 215,043 240,077 215,400 242,700 (0.2) (1.1)EPS (`) 38.7 44.1 38.3 44.4 1.1 (0.5)

Source: Bloomberg, Angel Research

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August 8, 2013 10

Exhibit 22:One-year forward EV/EBITDA


Exhibit 23:Tata Motors vs Sensex


Exhibit 24:Automobile - Recommendation summaryCompany Reco. CMP(`) Tgt. price(`) Upside(%)

P/E (x) EV/EBITDA (x) RoE (%) FY13-15E EPSFY14E FY15E FY14E FY15E FY14E FY15E CAGR (%)

Ashok Leyland Buy 12 22 79.7 32.6 6.7 5.4 3.3 2.3 11.0 74.4

Bajaj Auto Buy 1,771 2,099 18.5 14.8 12.7 10.1 8.2 38.9 36.5 15.3

Hero MotoCorp Accumulate 1,830 2,048 12.0 16.5 12.5 8.4 7.2 40.1 42.1 17.5

Maruti Suzuki Buy 1,334 1,648 23.5 14.1 12.1 6.2 5.4 14.4 14.6 17.8

Mahindra &Mahindra

Buy 843 1,103 30.8 13.3 11.9 7.0 5.7 23.2 21.8 13.8

Tata Motors Buy 279 355 27.4 7.2 6.3 3.5 3.1 28.5 25.1 15.8TVS Motor Buy 30 35 17.0 6.0 5.1 1.9 1.3 18.1 18.5 15.3


Company background

Tata Motors (TTMT) is the largest commercial vehicle manufacturer in India with a

domestic market share of ~60% and ~57% in the MHCV and LCV segments

respectively. The company is also India's third largest PV manufacturer, with a

domestic market share of ~10%. The company operates from its plants in

Jamshedpur, Pune, Lucknow, Sanand, Pantnagar and Dharwad. TTMT acquired

UK based luxury car manufacturer Jaguar Land Rover (JLR) in June 2008; it now

accounts for ~72% of its consolidated revenue.

0

50,000

100,000

150,000

200,000

250,000

300,000

Apr-03

Apr-04

Apr-05

May-0

6

May-0

7

Jun-0

8

Jun-0

9

Jun-1

0

Jul-11

Jul-12

Aug-1

3

(`cr) EV (` cr) 2x 4x 6x 8x

0

50

100

150

200

250

300

Apr-07

Sep-0

7

Mar-08

Sep-0

8

Mar-09

Sep-0

9

Mar-10

Aug-1

0

Feb-1

1

Aug-1

1

Feb-1

2

Aug-1

2

Feb-1

3

Aug-1

3

Tata Motors Sensex

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August 8, 2013 11

Profit and loss statement (Consolidated)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015ETotal operating income 92,519 122,128 165,654 188,818 215,043 240,077% chg 30.5 32.0 35.6 14.0 13.9 11.6Total expenditure 84,747 105,310 143,343 164,270 186,012 207,306Net raw material costs 61,495 79,008 109,468 120,321 135,477 151,968

Other mfg costs 3,452 4,509 5,440 6,250 7,311 8,163

Employee expenses 8,943 9,343 12,298 16,584 19,139 21,607

Other 10,857 12,450 16,137 21,115 24,085 25,568

EBITDA 7,772 16,817 22,311 24,547 29,031 32,770% chg 414.9 116.4 32.7 10.0 18.3 12.9

(% of total op. income) 8.4 13.8 13.5 13.0 13.5 13.7

Depreciation & amortization 3,887 4,656 5,625 7,569 8,729 10,281

EBIT 3,885 12,162 16,686 16,978 20,302 22,490% chg - 213.1 37.2 1.8 19.6 10.8


Interest and other charges 2,465 2,385 2,982 3,553 3,930 3,792

Other income 1,058 429 662 812 909 1,018

Recurring PBT 2,478 10,206 14,365 14,236 17,280 19,715% chg - 311.9 40.8 (0.9) 21.4 14.1

Extraordinary income/ exp. (1,045) (231) 832 603 - -

PBT (reported) 3,523 10,437 13,534 13,633 17,280 19,715Tax 1,006 1,216 2,811 3,771 4,838 5,520

(% of PBT) 28.6 11.7 20.8 27.7 28.0 28.0

PAT (reported) 2,517 9,221 10,723 9,862 12,442 14,195Profit in earnings of asso. 85 101 25 114 114 114

Minority interest (MI) 30 49 82 84 95 110

PAT after MI 2,571 9,274 10,665 9,893 12,461 14,199ADJ. PAT 1,526 9,043 11,497 10,495 12,461 14,199% chg - 492.6 27.1 (8.7) 18.7 13.9


Basic EPS (`) 9.0 29.2 33.6 31.0 38.7 44.1Adj. EPS (`) 5.3 28.5 36.2 32.9 38.7 44.1% chg - 432.8 27.1 (9.2) 17.7 13.9

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August 8, 2013 12

Balance sheet statement (Consolidated)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015ESOURCES OF FUNDSEquity share capital 571 635 635 638 644 644Reserves & surplus 7,827 18,537 32,064 36,999 49,111 62,623

Shareholders Funds 8,398 19,171 32,699 37,637 49,754 63,267Minority interest 214 247 307 370 370 370

Total loans 35,108 30,362 38,704 43,722 42,722 41,222Deferred tax liability 1,154 1,464 (2,374) (2,409) (2,409) (2,409)

Other long term liabilities - 2,293 2,298 3,284 3,284 3,284

Long term provisions - 4,826 6,232 8,319 8,319 8,319

Total Liabilities 44,873 58,362 77,865 90,924 102,041 114,053APPLICATION OF FUNDSGross block 63,823 71,463 89,779 102,571 122,945 144,799

Less: Acc. depreciation 34,232 39,699 49,512 51,505 60,234 70,515

Net Block 29,590 31,764 40,267 51,066 62,711 74,284Capital work-in-progress 8,916 11,457 15,946 18,418 22,130 26,064

Goodwill 3,423 3,585 4,094 4,102 4,102 4,102

Investments 2,219 2,544 8,918 9,058 10,204 11,405Long term loans and adv. - 9,818 13,658 15,465 15,465 15,465Other noncurrent assets - 332 575 1,024 1,024 1,024Current assets 42,446 40,881 56,935 66,464 68,314 71,139Cash 8,743 11,410 18,238 21,113 20,912 18,209

Loans & advances 15,199 8,875 12,244 13,440 13,978 15,605

Other 18,503 20,596 26,453 31,912 33,423 37,325

Current liabilities 41,721 42,019 62,526 74,674 81,910 89,431

Net current assets 725 (1,138) (5,591) (8,209) (13,596) (18,292)Misc. exp. not written off - - - - - -

Total Assets 44,873 58,362 77,865 90,924 102,041 114,053Note: Cash includes bank balances with maturity of more than 3 months but less than 12 months

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August 8, 2013 13

Cash flow statement (Consolidated)

Y/E March (` cr) FY2010 FY2011 FY2012 FY2013 FY2014E FY2015EProfit before tax 3,523 10,206 14,365 14,236 17,280 19,715

Depreciation 3,887 4,656 5,625 7,569 8,729 10,281Change in working capital 5,099 4,048 2,280 2,279 5,272 2,063

Others (1,448) (6,024) (414) 2,560 - -

Other income (1,058) (429) (662) (812) (909) (1,018)

Direct taxes paid (1,006) (1,216) (2,811) (3,771) (4,838) (5,520)

Cash Flow from Operations 8,997 11,240 18,384 22,062 25,534 25,521(Inc.)/Dec. in fixed assets (3,736) (10,181) (22,805) (15,263) (24,087) (25,787)

(Inc.)/Dec. in investments (962) (325) (962) (140) (1,146) (1,201)

Other income 1,058 429 662 812 909 1,018

Others (4,051) 3,053 4,151 (8,289) - -

Cash Flow from Investing (7,690) (7,023) (18,954) (22,881) (24,324) (25,971)Issue of equity 1,405 4,700 (164) 145 343 -

Inc./(Dec.) in loans 135 (4,746) 8,342 5,018 (1,000) (1,500)

Dividend paid (Incl. Tax) 365 1,002 1,481 1,489 753 753

Others (938) 2,357 (3,092) (8,308) - -

Cash Flow from Financing 2,842 (1,401) 6,567 (1,656) (1,410) (2,253)Inc./(Dec.) in cash 4,148 2,816 5,998 (2,474) (200) (2,703)

Opening Cash balances 4,121 6,530 9,345 15,343 21,113 20,912Closing Cash balances 6,530 9,345 15,343 12,869 20,912 18,209Note: Closing cash excludes bank balances with maturity of more than 3 months but less than 12

months

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August 8, 2013 14

Key ratios

Y/E March FY2010 FY2011 FY2012 FY2013 FY2014E FY2015EValuation Ratio (x)P/E (on FDEPS) 52.1 12.9 7.7 8.5 7.2 6.3P/CEPS 14.7 7.7 5.2 4.9 4.2 3.7

P/BV 9.7 4.7 2.7 2.4 1.8 1.4

Dividend yield (%) 1.1 1.4 1.4 0.7 0.7 0.7

EV/Sales 1.1 0.8 0.6 0.5 0.5 0.4

EV/EBITDA 13.3 6.2 4.5 4.2 3.5 3.1

EV / Total Assets 2.3 1.8 1.3 1.1 1.0 0.9

Per Share Data (`)EPS (Basic) 5.3 21.6 36.2 32.9 38.7 44.1

EPS (fully diluted) 5.3 24.1 40.3 32.9 38.7 44.1

Cash EPS 19.0 36.3 53.9 56.6 65.8 76.0

DPS 3.0 4.0 4.0 2.0 2.0 2.0

Book Value 25.9 60.0 102.8 117.8 154.4 196.4

Dupont AnalysisEBIT margin 4.2 10.0 10.1 9.0 9.4 9.4

Tax retention ratio 0.7 0.9 0.8 0.7 0.7 0.7

Asset turnover (x) 2.6 3.1 3.5 3.4 3.3 3.1

ROIC (Post-tax) 7.9 27.6 27.9 22.1 22.2 20.9

Cost of Debt (Post Tax) 5.0 6.4 6.8 6.2 6.5 6.5

Leverage (x) 3.7 1.5 0.5 0.4 0.3 0.2

Operating ROE 18.7 58.6 39.2 27.7 26.7 23.8

Returns (%)ROCE (Pre-tax) 8.9 23.6 24.5 20.1 21.0 20.8

Angel ROIC (Pre-tax) 11.5 27.5 33.0 28.0 28.6 26.6

ROE 21.3 65.6 44.3 29.8 28.5 25.1

Turnover ratios (x)Asset Turnover (Gross Block) 1.5 1.8 2.1 2.0 1.9 1.8

Inventory / Sales (days) 44 38 36 38 37 36

Receivables (days) 24 20 16 19 18 18

Payables (days) 134 110 123 129 125 122

WC cycle (ex-cash) (days) (22) (31) (40) (51) (54) (54)

Solvency ratios (x)Net debt to equity 2.9 0.9 0.4 0.4 0.2 0.2

Net debt to EBITDA 3.1 1.0 0.5 0.6 0.4 0.4

Interest Coverage (EBIT / Int.) 1.6 5.1 5.6 4.8 5.2 5.9

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Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to thelatest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates mayhave investment positions in the stocks recommended in this report.

Disclosure of Interest Statement Tata Motors

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors

tata motors, 1q fy 2014

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