investors please listen investors tata motors 2qfy10 conso factoringbusinesssite com
Tata Motors Ltd.
Mixed bag, Maintain SELL
factoring business
SELL
CMP: Rs 630 Target Price: Rs 415
factoring business
Tata Motors' (TML) 2QFY10 consolidated results were mixed bag. While net sales and EBIDTA were in line with expectation, net profits were below expectation. JLR reported below expected EBIDTA (¡ê42 mn vs expectation of ¡ê51 mn),factoring business however, other subsidiaries adequately compensated for the same. JLR continues to capitalize ~¡ê100 mn pound of R&D spend per quarter. TML has provided for (in reserves) actuarial loss of Rs7.4 bn for JLR pension revaluations.
factoring business
We expect JLR to remain FCF negative despite factoring in a strong turnaround in profitability. We expect JLR to report sales of ~167000 units and ~185000 units in FY10 and FY11 respectively.At the current juncture, we do not expect a strong recovery in the US/EU (for details refer to our note 'Tata Motors ¨C Expecting too much too soon')
We continue to have concerns with respect to the balance sheet of the company (net D/E-ex financing business of 3x, ROCE of 11% despite a stronger ROE of 33%,factoring business P/B of 3.8x). Hence we are not comfortable giving a higher valuation multiple to stock. We continue to value the stock at discount to other automobile stocks.
We have valued TML standalone at target EV/EBIDTA multiple of the standalone business to 7x (20% discount to M&M).factoring business We have valued JLR at 5x EV/EBIDTA and other subsidiaries (ex TMFSL) at 20% discount to TML. We maintain our SELL rating on the stock with a target price of Rs 415 (upgraded by 4%).
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