We raise our FY11e/ FY12e consolidated EPS to `132.6/`145.7 from `126.0/`137.3 on Tata Motors' robust 3Q performance, which was driven by a strong show at JLR; India performance was as expected. JLR's qoq performance shows little signs of abating and we believe it will continue driving consolidated performance. Re-iterate Buy.
n JLR - Key performance driver. JLR's results were driven by improved realizations, change in product mix (shift of focus towards high-value products) and strong EBITDA growth. JLR's EBITDA margin grew to 17.4% (2QFY11:16.6%; 3QFY10: 9.8%) while profit was up 4x yoy and 15.4% qoq to £275m.
n India operations in line. Tata Motors' standalone 3QFY11 results were broadly in line with expectations. EBITDA grew 3.8% yoy to `11.9bn, while adjusted profit was up +2.5% yoy to `4.3bn; both as per expectations. 3QFY11 EBITDA margin of 10.4% was impacted by yoy rise in raw material costs.
n Change in estimates. We increase our FY11e and FY12e consolidated EPS to `132.6 (6.4x yoy growth) and `145.7 (10% yoy growth) respectively, to factor in the strong JLR performance.
n Valuation and risks. We reiterate Buy and maintain target price of `1,543 - standalone value `565 (17.5x FY12e earnings), subsidiaries and associates at `177, and JLR at `801. Risks: lower European and US demand; CV demand decline; adverse forex.
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
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