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Tata Motors – Results Surprise

August 11, 2010

Tata Motors reported consolidated 1QFY11 adjusted net income of Rs20.3bn vs. Rs6.6bn loss in 1QFY10, and Rs8.8bn profit in 4QFY10 (up 130% qoq). This is significantly ahead of our adjusted net income estimate of Rs12.1bn and implied Bloomberg consensus of Rs10.1bn for the quarter. The company reported consolidated EBITDA margin of 14.3% vs. 3.1% in 1QFY10 and 10.9% in 4QFY10.

The main source of surprise was performance at the JLR division, which reported an adjusted net income of Rs15bn vs. Rs4.8bn loss in 1QFY10, and up 188% qoq. The key driver of JLR’s sequential earnings growth was higher realizations with net sales up 10% qoq (on GBP basis) against sales volumes rise of 0.3% qoq, mainly due to: 1) favourable exchange rate movement helping realizations by about 4%, by our estimate; 2) an enhanced product range; and 3) increased exposure to more profitable markets like China. On a qoq basis, Jaguar volume was up 41.7%, while Land Rover was down 9.5%.

India business also reported stable EBITDA margins at 11.2% for 1QFY11 vs. 11.3% during 1QFY10 and 9.4% during 4QFY10, while net revenue was up 63% yoy, but down 15% qoq due to seasonal weakness.

EPS for FY 11 FY 12 and Stock Price Target Set by Analysts on Tata Motors
Credit Suisse – 116, 131 and target of 1146
Merrill – 107, 121 and target of 1100
UBS 108 and 122 with target of 1200

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