TATA Motors - Fortune Financial Services

Forex losses dent good operational results 

Fortune 

India Equity Research Q2FY12 Result Update 

BUY November 15, 2011 

Sector outlook: Neutral 

Target price: Rs230 

CMP: Rs181 

Upside: 27% 

* Price as on November 15, 2011 

500570 Sensex: 16,883 

TATAMOTORS Nifty: 5,068 

TAMO.BO 52 W-H/L: 276/138 

TTMT.IN 

Face Value-Rs2 

Market cap (Rs mn) 531,979* 

Daily vol. (3M NSE avg.) 4,061,663 

Current share O/S (mn) 3,173* 

Diluted shares (mn) 3,323* 

Promoters holding (%) 35.05 

Pledged shares (%) 2.92 

* Including DVR shares 

Mahantesh Sabarad 

mahantesh.sabarad@fortune.co.in 

+91 22 4300 3821 

Vijay Nara 

vijay.nara@fortune.co.in 

+91 22 4300 3822 

Key financial - Consolidated (Y/E March) 

(Rs mn) FY11 FY12E FY13E 

Net sales 1,231,333 1,435,884 1,600,668 

Growth (%) 33.1 16.6 11.5 

EBITDA 177,800 186,232 201,041 

EBITDA (%) 14.4 13.0 12.6 

PAT 92,736 77,725 93,020 

Growth (%) 939.3 (16.2) 19.7 

Diluted EPS 27.9 23.4 28.0 

Source: Company, Fortune Research 

Valuation / Ratios 

(x) FY11 FY12E FY13E 

P/E 6.5 7.7 6.5 

P/B 3.2 2.1 1.7 

EV/EBITDA 4.2 3.6 3.1 

EV/Sales 0.6 0.5 0.4 

RoE (%) 68.6 32.6 28.7 

RoCE (%) 23.2 18.6 19.5 


TATA Motors 

Automobiles 

Tata Motors (TML) Q2FY12 consolidated PAT was 13.1% below expectation, while 

operating profit was marginally better. MTM forex loss of Rs4.4 bn dragged down 

operational performance. Revenues met our expectations while absolute EBITDA was just 

3.2% better with the margin at 13.3% being 39 bps better than expected. Standalone 

profit at Rs1.0 bn was 80.5% lower than our expectation as TML reported an exceptional 

loss on forex of Rs2.9 bn. Its UK-based subsidiary JLR gave a steady performance 

masking the poor standalone showing with an EBITDA of 14.9% that fell 166 bps YoY and 

13 bps QoQ along expected lines. However, the JLR unit had a £94 mn (Rs7.2 bn) MTM 

loss on forex and commodity option hedges that under Indian GAAP were amortized over 

remaining contract period limiting their P&L. From the end of quarter till date, loss on 

these options has been mostly (2/3) reversed out. 

Result highlights: TML’s consolidated net sales were up 25.8% YoY and 7.8% QoQ to 

Rs362 bn. Standalone net sales were Rs129.5 bn, expanding 12.6% YoY and 8.9% QoQ. 

Adverse mix and higher raw material prices led to a fall in standalone EBITDA margin by 

251 bps YoY and 119 bps QoQ to 7.2%. Consolidated EBITDA too fell 123 bps YoY, but 

was flat QoQ to 13.3%. JLR’s margin fell as a result of adverse currency movements to 

14.9%, down 166 bps YoY and 13 bps QoQ. Absolute consolidated EBITDA at Rs48.2 bn 

rose 15.1% YoY and 7.9% QoQ, bettering our estimate by 3.2%. Forex MTM losses of 

Rs4.4 bn and higher depreciation and amortization costs dragged the PBT down by 

10.0% YoY and 3.2% QoQ. PAT, at Rs18.8 bn, fell 15.6% YoY and 6.1% QoQ, which was 

lower than our estimate by 13.1%. The addition of Rs3.16 bn to JLR’s pension provision 

pulled shareholder reserves down. TML’s net debt, excluding vehicle loans, position is 

now comfortably placed at 0.7x or 1.12x, including vehicle loan. In fact JLR’s net debt is 

at a mere Rs15 bn. 

Valuation: At the CMP of Rs181 TML trades at a P/E of 6.5x its FY13E consolidated 

estimates. We have lowered our estimates, more for FY12E than FY13E. This revision is 

mainly linked to the poor performance of its Indian passenger vehicles division. JLR 

volume momentum is building up and, moving forward, is set to retain its current 

financial performance. Given the continuing positive cash flow generation at JLR, TML 

should be able to tackle its debt exposures rather well. In fact, the equity dilutions from 

convertible bonds may not happen as they get paid out in June. We continue to value 

TML 8x on its forward earnings with the company averaging 7.7x in the past year. 

Finally, leaving our price target untouched, we retain our BUY rating on the stock. 

Quarterly financials (Consolidated) 

Y/E Mar (Rs mn) Q2FY12 Q2FY11 Q1FY12 YoY (%) QoQ (%) Q2FY12E 

Variance 

(%) 

Net sales 361,975 287,820 335,725 25.8 7.8 361,542 0.1 

Consmp. of RM 241,388 184,496 219,352 235,642 

% of sales 66.7 64.1 65.3 259 bp 135 bp 65.2 151 bp 

Employee costs 28,656 22,742 25,925 28,307 

% of sales 7.9 7.9 7.7 7.8 

Other expenditure 43,777 38,743 45,831 50,924 

% of sales 12.1 13.5 13.7 14.1 

Operating profit 48,154 41,839 44,617 15.1 7.9 46,670 3.2 

OPM (%) 13.3 14.5 13.3 -123 bp 1 bp 12.9 39 bp 

Dep. & amort. 16,423 12,770 13,691 14,661 

Interest 5,251 5,313 7,659 6,979 

EBT 26,481 23,757 23,267 11.5 13.8 25,029 5.8 

Other income 608 195 761 411 

PBT 27,089 23,953 24,028 13.1 12.7 25,440 6.5 

Exc. item (Reported) 4,390 (1,276) 570 - 

Provision for tax 3,630 3,131 3,519 3,886 4.0 

- effective tax rate 13.4 13.1 14.6 15.3 

'Minority share /Profit 

share in Assoc. 

(296) 134 57 46 

PAT (Reported) 18,773 22,232 19,996 (15.6) (6.1) 21,601 (13.1) 

Exc. item (Adj-post 

tax) 

- - - - 

PAT (Adjusted) 18,773 22,232 19,996 (15.6) (6.1) 21,601 (13.1) 

NPM (%) 5.2 7.7 6.0 -254 bp -77 bp 6.0 -79 bp 


See Disclaimer at the end of the report. 1 

Bloomberg Code FEBL 

Fortune Group

Fortune Group 

Quarterly financials (Standalone) 

Y/E Mar (Rs mn) Q2FY12 Q2FY11 Q1FY12 YoY (%) QoQ (%) Q2FY12E 

Variance 

(%) 

Net sales 129,538 115,041 118,979 12.6 8.9 132,249 (2.1) 

Consmp. of RM 95,761 81,643 82,312 92,334 

% of sales 73.9 71.0 69.2 296 bp 474 bp 69.8 411 bp 

Employee costs 6,829 5,810 6,211 7,242 

% of sales 5.3 5.1 5.2 5.5 

Other expenditure 17,617 16,413 20,470 20,695 

% of sales 13.6 14.3 17.2 15.6 

Operating profit 9,331 11,176 9,986 (16.5) (6.6) 11,978 (22.1) 

OPM (%) 7.2 9.7 8.4 -251 bp -119 bp 9.1 -185 bp 

Dep. & amort. 4,471 3,546 3,972 3,937 

Interest 2,121 3,072 2,532 2,328 

EBT 2,739 4,558 3,483 (39.9) (21.4) 5,714 (52.1) 

Other income 568 775 1,155 613 

PBT 3,307 5,333 4,638 (38.0) (28.7) 6,326 (47.7) 

Exc. item (As 

reported) 

2,942 (38) (24) - 

Provision for tax (655) 1,045 650 1,089 

- effective tax rate -19.8 19.6 14.0 17.2 

'Minority share /Profit 

share in assoc. 

PAT (Reported) 1,020 4,327 4,013 (76.4) (74.6) 5,237 (80.5) 

Exc. item (Adj. - post 

tax) 

- - - - 

PAT (Adjusted) 1,020 4,327 4,013 (76.4) (74.6) 5,237 (80.5) 

NPM (%) 0.8 3.8 3.4 -297 bp -259 bp 4.0 -317 bp 


Exhibit 01: Estimates dropped as we cut Nano volumes and introduce expenses 

on adverse forex movement 

Standalone Revised estimates Earlier estimates % revision 

FY12E FY13E FY12E FY13E FY12E FY13E 

Sales (Nos) 872,973 1,077,532 923,620 1,100,169 (5.5) (2.1) 

8.7 23.4 15.0 19.1 -630 bps 430 bps 

Net sales (Rs mn) 540,263 621,453 538,310 617,269 0.4 0.7 

EBITDA (Rs mn) 45,392 55,773 51,420 57,680 (11.7) (3.3) 

EBITDA (%) 8.4 9.0 9.6 9.3 -120 bps -40 bps 

Adj. PAT (Rs mn) 17,206 26,529 22,660 27,485 (24.1) (3.5) 

EPS (Rs) 5.2 8.0 7.0 8.5 (26.5) (6.6) 

Consolidated Revised estimates Earlier estimates % revision 


Net sales (Rs mn) 1,435,884 1,600,668 1,391,179 1,549,674 3.2 3.3 

EBITDA (Rs mn) 186,232 201,041 181,829 192,643 2.4 4.4 

EBITDA (%) 13.0 12.6 13.1 12.4 -10 bps 10 bps 

Adj. PAT (Rs mn) 77,725 93,020 89,542 93,500 (13.2) (0.5) 

EPS (Rs) 23.4 28.0 27.8 29.1 (16.0) (3.7) 

JLR Revised Estimates Earlier Estimates % Revision 


Sales (Nos) 270,419 290,160 267,739 287,284 1.0 1.0 

Net sales (Rs mn) 844,907 922,962 802,153 876,092 5.3 5.3 

EBITDA (Rs mn) 125,982 128,603 116,082 118,298 8.5 8.7 

EBITDA (%) 14.9 13.9 14.5 13.5 40 bps 40 bps 

Adj. PAT (Rs mn) 60,100 63,586 62,547 57,153 (3.9) 11.3 

Source: Fortune Research Estimates 

TATA Motors 2


Exhibit 02: Q2FY12 fared badly due to forex losses 

Exhibit 03: JLR profits don’t rise as expected due to tax 

burden on China sales 

Tata Motors (standalone) 

JLR 

146,006 

115,041 115,196 

118,979 

129,538 

2,660 

2,736 2,712 

2,929 

2,247 

4,327 4,101 5,734 4,013 1,020 

238 275 

384 

219 238 

Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 


Sales (Rs mn) 

Adjusted PAT (Rs mn) 

Sales (GBP mn) 

PAT (GBP mn) 

Exhibit 04: TDCV PAT hit by rising costs 

Exhibit 05: Tata Technologies gains appreciably 

TDCV 

Tata Technologies 

5,874 

6,582 

7,825 

8,778 9,018 

2,951 

3,133 

3,432 3,351 

3,716 

77 

337 157 26 

366 283 

474 396 484 

(44) 


Sales (Rs mn) PAT (Rs mn) 


Sales (Rs mn) 

PAT (Rs mn) 

Exhibit 06: Profits up ~28% as CV sales continue 

growth 

Exhibit 07: 230 bps YoY drop in NIMs results in slower 

PAT growth 

TML Drivelines 

Tata Motors Finance 

1,457 1,460 

1,798 1,754 

1,654 

3,733 

4,090 

4,713 

3,414 3,318 

614 572 549 

428 415 

449 

328 259 

485 524 



Sales (Rs mn) 

PAT (Rs mn) 

Sales (Rs mn) 

Adjusted PAT (Rs mn) 


Note: HVAL & HVTL have been merged into TML 

drivelines Ltd. 



Exhibit 08: Standalone business metrics weakening 

Exhibit 09: EBITDA margin shrinks considerably 

('000s) 

640 

630 

620 

610 

600 

590 

580 

570 

560 

64 

627 

618 616 

617 

56 

52 

54 

580 

45 


('000s) 

70 

60 

50 

40 

(Rsmn) 

13,500 

13,000 

12,500 

12,000 

11,500 

11,000 

10,500 

10,000 

9,500 

9,000 

10.4 

9.7 

8.8 

8.4 

7.2 

11,176 

11,960 

12,831 

9,986 

9,331 


(%) 

12.0 

10.0 

8.0 

6.0 

Realisation Per veh.(LHS) 

EBITDA per Veh.(RHS) 

EBITDA (LHS) 

EBITDA Margin (RHS) 

Source: Company, Fortune Research. 

Exhibit 10: Valuations now settling close to 8x on P/E basis 

(x) 

12.0 

11.0 

10.0 

9.0 

8.0 

7.0 

6.0 

5.0 

4.0 

(x) 

6.0 

5.5 

5.0 

4.5 

4.0 

3.5 

3.0 

2.5 

2.0 

1.5 

1.0 

Nov-10 

Dec-10 

Jan-11 

Feb-11 

Mar-11 

Apr-11 

May-11 

May-11 

Jun-11 

Jul-11 

Aug-11 

Sep-11 

Oct-11 

Nov-11 

Source: Bloomberg, Fortune Research 

PE (RHS) P/BV (LHS) EV/E (LHS) 



Consolidated financial tables (Y/E March) 

(Rs mn) 

Income statement FY09 FY10 FY11 FY12E FY13E 

Net sales 709,389 925,193 1,231,333 1,435,884 1,600,668 

% growth 99.0 30.4 33.1 16.6 11.5 

Raw materials 480,556 614,954 790,084 947,427 1,035,267 

% of net sales 67.7 66.5 85.4 102.4 111.9 

Employee cost 72,974 87,518 93,427 111,999 148,062 

% of net sales 10.3 9.5 10.1 12.1 16.0 

Other expenses 133,893 136,579 170,023 190,226 216,298 

% of net sales 18.9 14.8 18.4 20.6 23.4 

EBITDA 21,965 86,142 177,800 186,232 201,041 

EBITDA margin (%) 3.1 9.3 14.4 13.0 12.6 

Depn & amortn. 28,545 43,853 56,180 66,798 74,823 

EBIT (6,580) 42,288 121,620 119,435 126,218 

Interest exps. 19,309 22,397 20,454 25,685 23,580 

EBT (25,889) 19,891 101,166 93,750 102,639 

Other income 7,990 17,931 896 1,850 1,868 

Extraord. (Inc.)/Exps. 3,393 2,596 (2,310) 4,960 0 

PBT (21,293) 35,226 104,372 90,640 104,507 

Tax-Total 3,358 10,058 12,164 13,093 12,041 

Tax rate (%) - Total (15.8) 28.6 11.7 14.4 11.5 

Profit after tax (24,650) 25,169 92,208 77,547 92,466 

PAT Margin(%) (3.5) 2.7 7.5 5.4 5.8 

Share of profit in 

Invest.in assoc. 

(517) 845 1,014 590 1,099 

Share of minority in 

profit 

(115) 303 485 411 546 

Misce exp.in subsidi 0 0 0 0 0 

Reported PAT (25,053) 25,711 92,736 77,725 93,020 

Extra ord.inc./(Exps.) (9,749) (16,788) 0 0 0 

Adjusted PAT (34,802) 8,923 92,736 77,725 93,020 

PAT margin (%) (4.9) 1.0 7.5 5.4 5.8 

% growth (283.2) (125.6) 939.3 (16.2) 19.7 


Balance sheet FY09 FY10 FY11 FY12E FY13E 

Sources of funds 

Equity capital 5,141 5,706 6,377 6,348 6,348 

Reserves and surplus 54,266 76,359 185,338 282,344 356,779 

Shareholders’ funds 59,407 82,065 191,715 288,692 363,127 

Minority interest 4,030 2,135 2,466 2,877 3,423 

Secured loans 137,055 212,900 199,271 195,771 170,771 

Unsecured loans 212,684 140,935 128,643 67,457 82,868 

Total loan funds 349,739 353,835 327,914 263,228 253,639 

Deferred tax liab. - Net 6,802 11,536 14,638 13,488 12,337 

Total liabilities 419,977 449,571 536,733 568,285 632,526 

Appl. of funds 

Gross block 584,694 648,518 714,629 807,660 893,768 

Accumulated depn. (332,691) (344,135) (396,987) (453,486) (517,289) 

Capital WIP 105,330 80,680 117,289 112,289 107,289 

Net fixed assets 357,333 385,063 434,931 466,463 483,767 

Other investments 12,574 22,191 25,443 39,437 32,063 

Goodwill 37,187 34,229 35,848 34,848 33,848 

translation difference 6,365 0 0 0 0 

Inventories 109,506 113,120 140,705 180,505 199,365 

Sundry debtors 47,949 71,912 68,774 89,420 102,001 

Other current assets 26 24 19 22 20 

Cash and bank balances 41,213 87,433 109,479 98,475 151,890 

Loans and advances 128,166 152,807 191,372 207,954 241,092 

Total current assets 326,860 425,296 510,349 576,376 694,368 

Current liabilities 239,802 340,773 371,147 448,096 499,503 

Provisions 81,400 76,435 98,692 100,743 112,017 

Total current liab. 321,202 417,208 469,838 548,839 611,520 

Net current assets 5,658 8,088 40,511 27,537 82,848 

Misc. expenditure 861 0 0 0 0 

Total assets 419,977 449,571 536,733 568,285 632,526 


Ratios FY09 FY10 FY11 FY12E FY13E 

O/s shares (mn) 2,570 2,853 3,173 3,173 3,173 

Fully diluted shares (mn) 3,323 3,323 3,323 3,323 3,323 

Per share (Rs) 

Basic EPS (13.5) 3.1 29.2 24.5 29.3 

FDEPS (10.5) 2.7 27.9 23.4 28.0 

Cash EPS 1.1 20.9 44.8 43.5 50.5 

Book value 17.3 24.1 57.3 86.4 108.8 

DPS 1.2 3.0 4.0 5.0 5.0 

Valuation (x) 

P/E NM 67.5 6.5 7.7 6.5 

Price/Book value 10.5 7.5 3.2 2.1 1.7 

EV/Sales 1.2 0.9 0.6 0.5 0.4 

EV/EBITDA 38.4 9.2 4.2 3.6 3.1 

Profit ratios (%) 

RoE (48) 12.9 68.6 32.6 28.7 

RoCE (4.1) 5.9 23.2 18.6 19.5 

Leverage ratio 

Debt/Equity (x) 5.9 4.3 1.7 0.9 0.7 

Net Debt/Equity (x) 5.2 3.1 1.1 0.5 0.2 

Cash flow FY09 FY10 FY11 FY12E FY13E 

Net cash from 

operating activities 

52,949 107,422 125,569 169,120 153,865 

Net cash used in 

Investing activities 

(316,194) (73,978) (99,482) (101,025) (72,734) 

Net cash used in 

financing activities 

266,127 12,776 (4,041) (79,099) (27,716) 

Net increase/ 

decrease in cash 

2,882 46,220 22,046 (11,004) 53,415 

Cash at beginning 

of the year 

38,332 41,214 87,434 109,480 98,476 

Cash at end of the 

year 

41,214 87,434 109,480 98,476 151,891 





Investment ratings (Returns) 

Buy (>10%) Hold (-10 to 10%) Sell (

TATA Motors - Fortune Financial Services

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