Stock Analysis - Tata Motors Special Report By

Stock Analysis

Stock Analysis - Tata Motors

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CONTENTS

Introduction

Company profile

Returns to investors

Financials

Fundamental View

Balance Sheet

Fundamental View

Key Extracts

Technical View

PIVOT Points (Daily & Weekly)

Moving Averages

Fibonacci Retracement

Chart Analysis


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Introduction

Tata Motors Limited is India's largest automobile company. It is the leader in

commercial vehicles in each segment, and among the top three in passenger vehicles

with winning products in the compact, midsize car and utility vehicle segments. The

Company is the world's fourth largest truck manufacturer, and the world's second

largest bus manufacturer. Established in 1945, Tata Motors' presence indeed cuts

across the length and breadth of India. Over 5.9 million Tata vehicles ply on Indian

roads, since the first rolled out in 1954. The Company's manufacturing base in India is

spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar

Pradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka). The Company's 24,000

employees are guided by the vision to be "best in the manner in which we operate, best

in the products we deliver, and best in our value system and ethics."

Company profile

COMPANY PROFILE

Industry Auto - LCVs/HCVs

Business Group Tata Group

Incorporation Year 1945

Registered Office Bombay House, 24 Homi Mody Street Fort, Mumbai, Maharashtra-400001

Chairman Ratan Tata

Managing Director Carl Peter Forster

Company Secretary

H K Sethna

Auditor Deloitte Haskins & Sells

Listing London, Luxembourg, Mumbai, New York, NSE

Website www.tatamotors.com


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SHARE HOLDING PATTERN (in %)

PROMOTER'S HOLDING 34.84

DII 14.02

FII's 22.98

Others 28.16

Total 100.00

Returns to investors

RIGHT ANNOUNCEMENTS

YEAR RATIO

2008 1:6

2001 1:4

1991 1:5

BONUS ANNOUNCEMENTS

YEAR RATIO

1995 3:5

1982 2:5

1979 2:5

1977 1:5

DIVIDEND DETAILS

YEAR DIVIDEND (%)

July 2011 20.00

Aug 2010 15.00

Aug 2009 6.00

June 2008 15.00


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Financials

Balance Sheet of Tata Motors (Rs. Cr.)

Mar '11 Mar '10 Mar '09 Mar '08 Mar '07

Sources Of Funds

Total Share Capital 634.65 570.6 514.05 385.54 385.41

Equity Share Capital 634.65 570.6 514.05 385.54 385.41

Share app. money 3.06 0 0 0 0

Preference Share

Capital 0 0 0 0 0

Reserves 19,375.59 14,394.87 11,855.15 7,428.45 6,458.39

Revaluation Reserves 0 0 25.07 25.51 25.95

Networth 20,013.30 14,965.47 12,394.27 7,839.50 6,869.75

Secured Loans 7,766.05 7,742.60 5,251.65 2,461.99 2,022.04

Unsecured Loans 8,132.70 8,883.31 7,913.91 3,818.53 1,987.10

Total Debt 15,898.75 16,625.91 13,165.56 6,280.52 4,009.14

Total Liabilities 35,912.05 31,591.38 25,559.83 14,120.02 10,878.89

Application Of Funds

Gross Block 21,883.32 18,416.81 13,905.17 10,830.83 8,775.80

Less: Accum.

Depreciation 8,466.25 7,212.92 6,259.90 5,443.52 4,894.54

Net Block 13,417.07 11,203.89 7,645.27 5,387.31 3,881.26


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Capital Work in

Progress 4,058.56 5,232.15 6,954.04 5,064.96 2,513.32

Investments 22,624.21 22,336.90 12,968.13 4,910.27 2,477.00

Inventories 3,891.39 2,935.59 2,229.81 2,421.83 2,500.95

Sundry Debtors 2,602.88 2,391.92 1,555.20 1,130.73 782.18

Cash and Bank Balance 2,428.92 1,753.26 638.17 750.14 535.78

Total Current Assets 8,923.19 7,080.77 4,423.18 4,302.70 3,818.91

Loans and Advances 5,167.42 4,618.90 5,909.75 4,831.36 6,208.53

Fixed Deposits 0 0 503.65 1,647.17 290.98

Total CA, Loans &

Advances 14,090.61 11,699.67 10,836.58 10,781.23 10,318.42

Deffered Credit 0 0 0 0 0

Current Liabilities 15,055.69 16,117.80 10,968.95 10,040.37 6,956.88

Provisions 3,222.71 2,763.43 1,877.26 1,989.43 1,364.32

Total CL & Provisions 18,278.40 18,881.23 12,846.21 12,029.80 8,321.20

Net Current Assets -4,187.79 -7,181.56 -2,009.63 -1,248.57 1,997.22

Miscellaneous

Expenses 0 0 2.02 6.05 10.09

Total Assets 35,912.05 31,591.38 25,559.83 14,120.02 10,878.89

Contingent Liabilities 4,798.83 3,447.50 5,433.07 5,590.83 5,196.07

Book Value (Rs) 315.31 262.3 240.64 202.7 177.59


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Fundamental View

EBIDTA/APAT at Rs 42.3bn/21.7bn were 7%/4% above estimate driven by JLR.

JLR reports FCF of GBP 117mn despite capex/R&D of GBP 400mn.

Net D/E was 0.18x (Mar11 - 0.24x)

Net sales at GBP 2.7bn were marginally higher than estimate of GBP 2.6bn led by

improved realizations. Average selling price at GBP 43,682 increased ~14% Y/Y,

5.6% Q/Q driven by favorable geography mix (higher China sales) and lower

discount

Volume outlook remains strong for JLR with launch of Evoque, new XF (2.2 ltr

diesel) and also XF 2012

Lower FY12/FY13 EPS estimates by 11%/9% to Rs 138/155 to factor in

deteriorating macro environment (lower valuation multiple).

Product mix continues to remain in favor of LR due to inventory clearance of Jaguar

in US/UK in the run to the introduction of 2012 XF. Also company will be introducing

a smaller XF (2.2 tlr diesel) in 2H.

JLR continued to improve on its balance sheet and cash flow generation. Net debt

reduced sequentially from GBP 354mn to GBP 295mn in 1QFY12. Also net DE

registered improvement. More importantly, this was after a capex/R&D spends of

GBP 400mn

Consolidated EBITA at Rs 42.3bn was 7% above estimate of Rs 40bn driven by

stronger top line and better operating performance. JLR reported EBIDTA of GBP

408mn (est. GBP 400mn) before amortization of product development expenses.

However, EBIDTA for standalone business at Rs 9.7bn was lower than estimate

impacted by higher other expenses at 18.9%.


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Key Extracts

JLR is witnessing slight moderation in demand from US and UK geographies. China

and Russia continue to remain strong

Jaguar performance to improve driven by low base effect, inventory correction and

strong focus on ramping up dealer network in US and China. Also, expectation of

new XF launch is leading to softening of demand for the current model in US and

UK. Expect new XF launch to drive volume growth.

Landrover Evoque is scheduled for launch on Sep 2011. Orders as of June 2011

end stand at 18,000 units.

JLR margins to remain subdued due to Evoque product launch related costs,

unfavorable product mix with Evoque ramp up, higher R&D/prod. dev expenses and

currency movement.

Domestic business continues to face margin pressures on subdued demand and

high commodity prices. Company has taken a price increase of ~1.5% for CVs in

July. Freight rates have remained flat for this quarter despite rise in diesel prices.

Company hedges forex exposure on a 12 month rolling basis. ~60-70% of USD/GBP

exposure has been hedged for next quarter and lower exposure of subsequent

quarters.

Current capex stands at Rs 37bn for standalone business and GBP 370mn for JLR.

Consolidated Net debt (excl. vehicle finance) stands at Rs 145bn

(Standalone of Rs 137bn).

At CMP of Rs 712, the stock trades at PER of 6.1x/5.5x and EV/EBIDTA of 4.2x/3.7x

our FY12 and FY13 es. respectively. We are enthused by FCF generation at JLR

despite a GBP 400mn capex. Similarly, there is a sequential reduction in net debt.


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Technical View

Pivot Points (Daily)

SCRIPT R4 R3 R2 R1 P S1 S2 S3 S4

TATA

MOTORS 831.25 794.20 757.15 736.25 720.10 699.20 683.05 646.00 608.95

Pivot Points (Weekly)

SCRIPT R4 R3 R2 R1 P S1 S2 S3 S4

TATA

MOTORS 1094.58 978.53 862.48 788.92 746.43 672.87 630.38 514.33 398.28

Moving Averages

Moving Averages 20 Day 50 Day 100 Day 200 Day

Daily 892.58 951.27 1054.29 1130.71

Weekly 1051.75 1127.55 939.20 683.99

Fibonacci Retracement

Time Frame 0.0% 23.6% 38.2% 50.0% 61.8% 76.4% 100%

Weekly 1382 1083.47 898.79 749.52 600.25 415.57 124.80

Chart Analysis

In the weekly chart above, Tata Motors is following

and lower bottoms since Dec 2010. Presently,

sustain it in the near term and

lower top. From there, it can complete its intermediate

4th wave making lower top,

trendline drawn from peaks of 1270

then can slide back to its 200 SMA at around

this level; then can form its 5th

In Conclusion, Tata motors from

38.2% retracement level of Rs. 850 in the near term and from there would

downward to complete its 5th impulsive wave to

In the weekly chart above, Tata Motors is following Elliot wave pattern

and lower bottoms since Dec 2010. Presently, near its 200 SMA of Rs. 684, it

ustain it in the near term and can make a pullback rally to 38.2% level of

it can complete its intermediate correction phase and

, taking resistance of its upward downward resistance

trendline drawn from peaks of 1270. If stock forms a double top at around

then can slide back to its 200 SMA at around Rs. 680 and if in the near term it breaks

th impulsive wave to the level of 420 in coming

Tata motors from its 200 SMA of rs. 680-690 will see a pullback rally to

level of Rs. 850 in the near term and from there would

impulsive wave to Rs. 420 in the longer term.

a

b

c


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and lower tops

near its 200 SMA of Rs. 684, it can

to 38.2% level of 845 making a

phase and complete

taking resistance of its upward downward resistance

at around 38.2% level

680 and if in the near term it breaks

coming H2FY12.

will see a pullback rally to

level of Rs. 850 in the near term and from there would possibly slide

420 in the longer term.

c


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Stock Analysis - Tata Motors Special Report By