castrol india ltd - Myiris.com

More documents

Recommendations

Info

INITIATING COVERAGE MORNING INSIGHT October 25, 2012 Arun Agarwal arun.agarwal@kotak.com +91 22 6621 6143 Stock details BSE code : 500570 NSE code : TATAMOTORS Market cap (Rs mn) : 844,163 Free float (%) : 35 52 wk Hi/Lo (Rs) : 321/142 Avg daily volume (mn) : 15 Shares (o/s) (mn) : 3,174 Summary table (Rs mn) FY12 FY13 FY14E Sales 1,656,545 1,946,462 2,255,291 Growth (%) 36 18 16 EBITDA 223,112 253,463 305,298 EBITDA margin (%) 13.5 13.0 13.5 PBT 135,588 163,611 198,846 Net profit 135,165 120,700 150,563 EPS (Rs) 43 38 48 Growth (%) 46 (11) 25 CEPS (Rs) 60 60 75 Book value (Rs/share) 103 136 179 Dividend per share (Rs) 4 4 4 ROE (%) 52 32 30 ROCE (%) 31 29 29 Net cash (debt) (213,807) (230,548) (213,875) NW Capital (Days) (27) (25) (26) P/E (x) 6.2 7.0 5.6 P/BV (x) 2.6 1.9 1.5 EV/Sales (x) 0.6 0.6 0.5 EV/EBITDA (x) 4.7 4.2 3.5 Sales Q2FY12 Q3FY12 Q4FY12 Q1FY13 361,975 452,603 509,079 433,236 EPS (Rs) 5.9 10.7 19.6 7.0 Source: Company, Kotak Securities - Private Client Research TATA MOTORS LTD PRICE: RS.265 RECOMMENDATION: ACCUMULATE TARGET PRICE: RS.296 FY14E P/E: 5.6X With almost 70% sales coming in from JLR, Tata Motors’ success hinges over the performance of JLR. We expect JLR to continue the growth momentum over the next few years. Strong demand from developing countries coupled with new launches should aid JLR's volume growth over the medium term. We expect JLR's geography mix and product mix to improve going ahead. On standalone operations, we expect FY13 to be a difficult year but expect recovery in FY14 and that will be critical for expected strong earnings growth in FY14. We initiate coverage on Tata Motors (TAMO) with an ACCUMULATE rating and SOTP based price target of Rs296. Key investment argument � JLR's growth momentum to continue; will remain key for TAMO. Global demand for luxury cars has been on an uptrend for the past couple of years. Growth has come in from strong demand from both the developed and the developing markets. Rising income levels coupled with low penetration levels have led to strong demand for premium cars in developing economies. China will likely remain the key market for JLR. Volumes ahead are expected to gain momentum from the new launches that are planned over the next few quarters. � Product mix and geography mix expected to improve. JLR sells its products across geographies with no single market accounting for more than 25% of the volumes. With strong demand from China and other developing nations and relatively weak European scenario, we expect JLR's exposure to get further tilted in favor of growing markets. JLR's FY13 sales are expected to be largely driven by the success of Evoque. Being a relatively lower margin product, Evoque's increased share in the overall business will likely deteriorate the company's product mix in FY13. However, we expect the trend to change as company launches new models/refreshes/variants. We expect contribution from other models to increase which will strengthen the product portfolio. � Currently under pressure, domestic sales expected to recover in FY14. Volumes in the domestic auto segment are under pressure. Current scenario does not provide a lot of comfort in terms of quick volume recovery. However we remain optimistic about demand recovery over the medium to long term. Reasons for our positive view over the medium term include possible cut in interest rates, pent-up demand and expected economic recovery. Interest rate cycle is at its peak and any attempts from the RBI to lower rates will only be positive for the domestic auto sector. We expect the volumes from Indian operations to grow at 13% CAGR over FY12-FY14E. Valuations � We value TAMO on SOTP methodology and arrive at a fair value of Rs296. We have valued the company's standalone business at an EV/EBITDA of 7.5x which is similar to the multiple at which Ashok Leyland (M&HCV) and Maruti Suzuki (Passenger car) trades. Accordingly, we have arrived at a value of Rs82 per share. For the JLR business, we have valued it at EV/EBITDA of 3.5x to arrive at a value of Rs194 per share. We have valued TAMO's other subsidiaries at Rs20 per share. We assume coverage on Tata Motors with an ACCUMULATE rating and price target of Rs296. Kotak Securities - Private Client Research Please see the disclaimer on the last page For Private Circulation 2
MORNING INSIGHT October 25, 2012 Risk and Concerns � Lower than expected volume growth at JLR - JLR derives volumes from various geographies that include US and Europe. Recession in these geographies will have a negative impact on demand for luxury cars. Lower than expected volume growth will negatively impact sales and profitability of Tata Motors. � Delay in recovery in domestic demand - Currently the domestic macro factors are weak but we are expecting recovery going into FY14. We expect the volumes for TAMO to de-grow in FY13 but based on expected demand recovery, we have forecasted volumes to grow by 21% in FY14 on a subdued FY13 base. Any delay in domestic demand recovery will impact the company's revenues and profitability negatively. � Rise in raw material prices - Raw material cost forms the single largest cost for the company. Any steep increase in key raw material like steel, aluminum, rubber will have negative impact on the operating margins and subsequently on the net profits of Tata Motors. � Unfavorable currency movement - TAMO operates across various geographies and accordingly the company has exposure to different currencies. Significant unfavorable movement in related currencies can negatively impact the company's margins and profits. Kotak Securities - Private Client Research Please see the disclaimer on the last page For Private Circulation 3
Page 1: Economy News � The finance minist
Page 5 and 6: MORNING INSIGHT October 25, 2012
Page 7 and 8: RESULT UPDATE MORNING INSIGHT Octob
Page 9 and 10: MORNING INSIGHT October 25, 2012 We
Page 11 and 12: MORNING INSIGHT October 25, 2012 Qu
Page 13 and 14: MORNING INSIGHT October 25, 2012 Op
Page 15 and 16: MORNING INSIGHT October 25, 2012 Bu

castrol india ltd - Myiris.com

Create successful ePaper yourself

Delete template?

Save as template?