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1、Automobiles&components/India31 August 2012,Tata MotorsTTMT IN|TTM US,Target price:Rs263.00 Rs271.00Up/downside:+15.7%Share price(31 Aug):Rs234.30,Favourable risk-reward profile JLRs new product launches should offset a moderating demandenvironment in the premium-car segment Standalone business is li
2、kely to remain weak as MHCVs and PVsface demand headwinds Raising our SOTP-based target price to Rs271 and upgrading toOutperform on what we view as attractive valuationsHow do we justify our view?,as the MHCV and passenger-vehicle(PV)business are affected by weakdemand and increasing competition.,F
3、orecast revisions(%)Year to 31 MarRevenue changeNet-profit change,13En.m.n.m.,14En.m.n.m.,15En.a.n.a.,Navin Matta(91)22 6622 Whats newJaguar Land Rover(JLR)has arobust new product pipeline,and weexpect wholesale volume to improvestarting from 3Q FY13 as thecompany plans to launch four newmodels/vari
4、ants in the subsequentthree quarters.Whats the impactWhile sales-volume growth for thepremium-car segment is moderating,it is relatively strong for sport utilityvehicles(SUV)and in China,both ofwhich are favourable for JLR.Nearterm,we see additional sales-volumegrowth catalysts kicking in,with JLRsn
5、ew product launches starting from3Q FY13 and increased throughputfrom the companys Halewood facility(UK)with a rise in production shifts.While we still expect muted earningsgrowth for JLR over FY12-14,itshould see healthy FCF despite highinvestment in product development.We expect Tata Motors standa
6、lonebusiness to remain under pressure,This report marks a transfer ofanalyst coverage and a shift toearnings on a consolidated basis(standalone previously).We cut ourearnings forecasts for JLR by 10.5%for FY13 and 4.3%for FY14,as wefactor in higher productamortisation and taxes.For thestandalone bus
7、iness,we raise ourFY13E earnings by 25%toincorporate a dividend payout byJLR(excluding which,we cut ourearnings forecast by 30%),and cutour FY14E EPS by 31%to reflectweak sales-volume growth.What we recommendWe upgrade Tata Motors toOutperform(2)from Hold(3)andraise our SOTP-based six-monthtarget pr
8、ice to Rs271(from Rs263).Following the 26%share-price fallover the past four months,the stocktrades at a FY14E adjustedEV/EBITDA multiple of 3.5x,whichwe think is a good entry point forexposure to near-term sales-volumemomentum.How we differOur EPS forecasts are belowconsensus by 12%for FY13 and 9%f
9、or FY14,reflecting primarily ourlower forecasts for JLR.,EPS change n.m.n.m.n.a.Source:Daiwa forecastsn.m.=not meaningful;we are shifting our forecasts from astandalone to a consolidated basisShare price performance(Rs)(%)360 210300 180240 150180 120120 90Aug-11 Nov-11 Feb-12 May-12 Aug-12Tata Motor
10、s(LHS)Relative to SENSEX(RHS)12-month range 139.60-319.25Market cap(US$bn)13.43Average daily turnover(US$m)53.15Shares outstanding(m)3,190Major shareholder Tata group(35.0%)Financial summary(Rs)Year to 31 Mar 13E 14E 15ERevenue(m)1,881,951 2,092,636 2,323,327Operating profit(m)175,481 192,770 206,82
11、1Net profit(m)108,155 124,595 138,209Core EPS 33.906 39.060 43.328EPS change(%)(14.3)15.2 10.9Daiwa vs Cons.EPS(%)-12-9-4PER(x)6.9 6.0 5.4Dividend yield(%)2.1 2.6 3.0DPS 5.000 6.000 7.000PBR(x)1.8 1.4 1.2EV/EBITDA(x)4.4 3.8 3.4ROE(%)28.7 26.4 23.9Source:Bloomberg,Daiwa forecasts,Important disclosure
12、s,including any required research certifications,are provided on the last two pages of this report.,Jul-12,Oct-11,Oct-11,Jan-12,May-12,Feb-12,Feb-12,Aug-11,Aug-11,Sep-11,Nov-11,Dec-11,Dec-11,Mar-12,Jun-12,Jul-12,Aug-12,Apr-12,Apr-12,35.6,50,45,40,35,30,25,Automobiles&components/IndiaTTMT IN|TTM US31
13、 August 2012How do we justify our view?Growth outlookValuationEarnings revisions,Growth outlook,Tata Motors:consolidated net sales and net-profit growth,We forecast Tata Motors consolidated net sales toincrease at a 12.4%CAGR over FY12-14.We forecast theJLR business to account for 67%of overall cons
14、olidatednet sales,and generate a revenue CAGR of 13%overFY12-14.We forecast the standalone business to accountfor 29%of consolidated net sales for FY13 and forrevenue to increase at a much slower CAGR of 6.5%overFY12-14.We forecast Tata Motors consolidated netprofit to see a compound annual decline
15、of 0.4%overFY12-14,due primarily to JLRs net profit beingsuppressed by higher amortisation and tax expenses.,50403020100(10)(20),38.8FY12,13.6(13.9)FY13E,15.211.2FY14E,11.0 10.9FY15E,Consolidated net sales(%YoY)Source:Company,Daiwa forecasts,Consolidated net profit(%YoY),Valuation,Tata Motors:SOTP v
16、aluation,The stock has fallen significantly from its peak level fourmonths ago,and we believe its current valuation,withthe stock trading at an adjusted EV/EBITDA multiple of3.5x for FY14E,implies a favourable risk-reward profile.Since the acquisition of JLR in 2008,the stock hastraded at an average
17、 one-year-forward adjustedEV/EBITDA multiple of 4.1x.At our new SOTP-basedsix-month target price of Rs271,the stock would trade ata FY14E adjusted EV/EBITDA multiple of 3.9x.,Standalone businessJLR(on normalised EBITDA)Other subsidiariesLess:net automotive debtFair valueSource:Daiwa forecasts*adjust
18、ed,ValuationFY14EEV/EBITDA*FY14EEV/EBITDA*FY14E PER,PBR,Multiple(x)63.5,Value(Rs bn)30258376,Value pershare(Rs)9518324(30)271,Earnings revisionsThe Bloomberg-consensus EPS forecasts for FY13 andFY14 each have been cut by about 4%over the past fourmonths.However,we expect further EPS cuts in thecomin
19、g months as we believe the consensus forecastshave not factored in a higher tax rate on account of JLRhaving to pay tax at a marginal rate going forward.Wealso believe the consensus has not built in enough of anincrease in depreciation and amortisation expenses onthe back of several new launches ove
20、r our forecastperiod.,Tata Motors:consolidated consensus EPS(FY13-14E),Source:Bloomberg-2-,FY13 consensus EPS,FY14 consensus EPS,0,Automobiles&components/IndiaTTMT IN|TTM US31 August 2012Financial summaryKey assumptions,Year to 31 MarMHCV volumesMHCV volumes(%YoY)LCV volumesLCV volumes(%YoY)Passenge
21、r Vehicle volumesPassenger Vehicle volumes(%YoY)JLR volumesJLR volumes(%YoY),2008179,400(3.0)173,43416.2232,864(4.8),2009123,005(31.4)168,806(2.7)214,484(7.9)136,978,2010167,14235.9232,12437.5243,14513.4193,98241.6,2011214,35828.2287,63923.9305,63625.7243,62125.6,2012221,2023.2371,95029.3314,4362.93
22、14,43329.1,2013E206,473(6.7)417,37212.2303,744(3.4)356,66313.4,2014E226,5969.7476,13714.1358,77318.1395,30010.8,2015E241,5306.6532,05011.7403,70912.5434,0009.8,Profit and loss(Rs m),Year to 31 MarCommercial/Passenger vehicle,2008260,919,2009226,218,2010321,149,2011435,700,2012501,527,2013E497,554,20
23、14E563,399,2015E616,127,JLR,385,071,494,769,698,846 1,067,424 1,252,412 1,379,768 1,541,635,Others,95,596,98,099,109,274,86,734,87,593,131,985,149,470,165,565,Total revenue,356,515,709,389,925,193,1,221,279 1,656,545 1,881,951 2,092,636 2,323,327,Other income,0,0,0,0,0,0,0,0,COGS,(243,755),(479,660)
24、,(614,954),(790,084)(1,094,676)(1,249,950)(1,386,728)(1,539,223),SG&A,0,0,0,0,0,0,0,0,Other op.expenses,(78,507),(235,730),(267,950),(309,576)(395,011)(456,520)(513,138)(577,283),Operating profitNet-interest inc./(exp.)Assoc/forex/extraord./othersPre-tax profitTaxMin.int./pref.div./othersNet profit(
25、reported)Net profit(adjusted)EPS(reported)(Rs)EPS(adjusted)(Rs)EPS(adjusted fully-diluted)(Rs)DPS(Rs)EBITEBITDA,34,252(7,431)3,31830,140(8,515)5421,67820,30211.24610.53210.5323.00134,25242,073,(6,001)(19,309)7,472(17,838)(3,358)(3,278)(24,474)(21,081)(9.522)(8.202)(8.202)1.212(6,001)19,067,42,288(22
26、,397)1,26121,152(8,306)12,86525,71112,5439.0124.3964.3963.01142,28881,160,121,620(20,454)1,910103,075(12,164)1,82592,73690,42629.08328.35928.3594.000121,620168,175,166,859(24,946)1,991143,903(17,536)8,798135,165125,54442.58839.55739.5574.035166,859223,112,175,481(25,503)2,023152,001(43,134)(1,812)10
27、7,055108,15533.56133.90633.9065.000175,481247,679,192,770(24,996)3,029170,803(45,514)(1,894)123,395124,59538.68439.06039.0606.000192,770282,054,206,821(21,439)3,342188,723(49,728)(1,987)137,009138,20942.95243.32843.3287.000206,821314,745,Cash flow(Rs m),Year to 31 MarProfit before taxDepreciation an
28、d amortisationTax paidChange in working capitalOther operational CF itemsCash flow from operationsCapexNet(acquisitions)/disposalsOther investing CF itemsCash flow from investingChange in debtNet share issues/(repurchases)Dividends paidOther financing CF itemsCash flow from financingForex effect/oth
29、ersChange in cashFree cash flow,200830,1407,821(8,515)40,0339,72679,204(61,313)0(16,813)(78,126)42,830(5,323)(6,597)(7,381)23,5292,18326,79017,891,2009(17,838)25,068(3,358)53,45113,49270,815(253,767)0(17,844)(271,610)233,890362(3,457)(26,465)204,329(653)2,881(182,951),201021,15238,871(8,306)43,78941
30、,366136,872(66,601)0(6,117)(72,719)2,1856,867(9,919)(15,172)(16,039)(1,895)46,22070,271,2011103,07546,555(12,164)(5,952)22,941154,456(96,423)0(4,343)(100,766)(23,818)31,596(14,683)(20,454)(27,359)33126,66358,033,2012143,90356,25440025,215(8,841)216,932(185,239)0(68,560)(253,799)143,384(30)(14,637)(1
31、4,549)114,16860577,90731,693,2013E152,00172,198(29,313)(13,972)24,129205,043(216,677)00(216,677)(880)2,006(18,533)(25,941)(43,347)712(54,269)(11,634),2014E170,80389,283(28,521)(20,763)23,494234,297(177,254)00(177,254)28,0000(22,240)(25,388)(19,628)69438,10957,043,2015E188,723107,924(32,324)(25,113)1
32、9,908259,118(195,085)00(195,085)28,0000(25,946)(21,894)(19,841)78744,97964,033,Source:Company,Daiwa forecasts-3-,Automobiles&components/IndiaTTMT IN|TTM US31 August 2012Financial summary continued Balance sheet(Rs m),As at 31 MarCash&short-term investmentInventoryAccounts receivableOther current ass
33、etsTotal current assetsFixed assetsGoodwill&intangiblesOther non-current assetsTotal assetsShort-term debtAccounts payableOther current liabilitiesTotal current liabilitiesLong-term debtOther non-current liabilitiesTotal liabilitiesShare capitalReserves/R.E./othersShareholders equityMinority interes
34、tsTotal equity&liabilitiesEVNet debt/(cash)BVPS(Rs),200838,33232,94620,605100,790192,674128,6345,66216,984343,9530113,19223,254136,446115,8490252,2943,85583,12086,9754,683343,953533,86077,51745.119,200941,213101,54748,001126,514317,275357,33337,18712,998724,7930241,02670,592311,618349,7390661,3565,1
35、4154,26659,4064,030724,793914,765308,52523.113,201087,433113,12071,912152,831425,296385,06334,2298,743853,3320340,77376,435417,208351,9240769,1325,70676,35982,0652,135853,332935,083264,49028.764,2011114,096140,70565,257187,539507,597434,93135,84810,805989,1810367,32399,571466,894328,1060795,0006,377
36、185,338191,7152,466989,181963,576214,01060.124,2012182,381182,16082,368262,978709,888563,91640,937117,4341,432,1760497,698128,418626,116471,49001,097,6056,348325,152331,4993,0711,432,1761,035,789289,108104,2013E128,112191,50591,477275,193686,286708,39440,937103,6131,539,2310510,881131,930642,811470,
37、61001,113,4216,380415,648422,0273,7831,539,2311,093,662342,498132,2014E166,221212,246103,041286,005767,513796,36540,93786,6191,691,4350525,728139,437665,165498,61001,163,7756,380516,803523,1834,4771,691,4351,084,247332,389164,2015E211,200234,025114,144300,274859,643883,52640,93769,2151,853,3220539,5
38、22147,681687,203526,61001,213,8136,380627,866634,2455,2641,853,3221,068,054315,410199,Key ratios(%),Year to 31 MarSales(YoY)EBITDA(YoY)Operating profit(YoY)Net profit(YoY)EPS(YoY)Gross-profit marginEBITDA marginOperating-profit marginROAEROAAROCEROICNet debt to equityEffective tax rateAccounts recei
39、vable(days)Payables(days)Net interest cover(x)Net dividend payout,200810.26.14.5(3.6)(3.7)31.611.89.624.76.919.015.889.128.319.395.04.626.7,200999.0(54.7)n.a.n.a.n.a.32.42.7n.a.n.a.n.a.n.a.n.a.519.3n.a.17.691.1n.a.n.a.,201030.4325.7n.a.n.a.n.a.33.58.84.617.71.610.07.1322.339.323.7114.81.933.4,201132
40、.0107.2187.6620.9545.135.313.810.066.19.825.428.3111.611.820.5105.85.913.8,201235.632.737.238.839.533.913.510.148.010.425.128.487.212.216.395.36.79.5,2013E13.611.05.2(13.9)(14.3)33.613.29.328.77.320.618.181.228.416.997.86.914.9,2014E11.213.99.915.215.233.713.59.226.47.720.117.463.526.617.090.47.715.
41、5,2015E11.011.67.310.910.933.713.58.923.97.818.916.849.726.317.183.79.616.3,Source:Company,Daiwa forecastsCompany profileTata Motors is Indias largest automobile company with consolidated revenue of US$30bn for FY12.It is the leader in thecommercial-vehicle segment and the third-largest player in th
42、e passenger-car segment.Through subsidiaries and associatecompanies,Tata Motors has operations in the UK,South Korea,Thailand,and Spain.Among them is Jaguar Land Rover,abusiness comprising the two iconic British brands,which was acquired in 2008.-4-,Jul-10,Jul-11,Jan-11,May-10,May-11,Jan-12,May-12,M
43、ar-10,Mar-11,Sep-10,Nov-10,Sep-11,Nov-11,Mar-12,Jul-12,40,35,30.0,23.7 24.3,25,0,Automobiles&components/IndiaTTMT IN|TTM US31 August 2012We believe this segment will continue to see healthysales-volume growth,at least in FY13,as customerappeal and the relatively low base should act as keydrivers.,Fa
44、vourable risk-rewardprofile,Quarterly growth trend in the SUV and non-SUV segments35.231.03022.9,Premium car segment salesvolume growth moderates,pricing risk may emergeSUV category showing healthy growth,2015105,13.3Mar-12,6.4Jun-11,8.7Sep-11,10.4Dec-11,7.0Mar-12,4.8Jun-12,While resilient demand fo
45、r premium vehicles surprised,Non-SUV(%YoY),SUV(%YoY),positively in 2011,the persistent slowdown in economicgrowth worldwide this year has started to have adiscernable impact on demand for premium vehicles.Aggregate demand growth for a few key luxury carmakers,including BMW(Not rated),Mercedes(Notrat
46、ed),Audi(Not listed)and JLR,has decelerated fromaround 13-14%YoY in CY11/FY12 to 7-8%YoY over thepast couple of months.However,we note that there area few product segments and markets that are stillwitnessing healthy demand,albeit with somemoderation in growth levels.Aggregate growth trend amongst k
47、ey premium car makers25%20%,Source:Companies,DaiwaNote:Sales volume growth above includes BMW,Mercedes Benz,Audi and JLRAmong the above-mentioned set of luxury car makers,we find that the average level of volume contributionfrom the SUV segment ranges between 25%and 30%.JLR is the only exception,wit
48、h 83%of its volumecoming from the SUV segment,and therefore shouldbenefit from better relative sales-volume growth forSUVs.Volume split across key premium car makers in the trailingfour quarters100%17%80%,15%10%5%0%,60%40%20%0%,71%29%BMW,80%20%Mercedes,79%21%Audi,83%JLR,SUV,Non-SUV,3MMA%Source:Compa
49、nies,DaiwaNote:Sales volume growth above includes BMW,Mercedes Benz,Audi and JLRIf we split the product portfolio of the above-mentioned premium car manufacturers into SUVs andnon-SUVs(sedans,coupes,convertibles,etc),we findthat sales-volume growth in the SUV segment has beenwell above the non-SUV s
50、egment over the past fewyears.A large part of the strong growth can beattributed to the recent launches in the compact SUVsub-segment,including the Range Rover Evoque andAudi Q3,which has possibly prompted erstwhile sedanbuyers to shift to this category,in addition to wideningthe target customer bas
