Tata Motors Ltd (updated - 02 Feb 2010)
Asequential increase of 4per cent in sales volume helped Tata Motors post a 12.5-per cent increase in standalone sales revenues for the quarter ended December 2009 at Rs 8,979 crore. Realisations in the third quarter surged due to the price hikes affected by the company and the change in the model mix.
While sales moved up, operating profit margin (OPM), that was trending up till the September quarter, fell 56 bps on a sequential basis to 12.8 per cent due to higher input cost. The price increase during the quarter was not enough to overcome the rising raw material costs, which as a percentage of sales rose 300 bps to 68.5 per cent. To protect margins, Tata Motors increased prices on its CV portfolio (medium and heavy commercial vehicles) by a per cent, while prices of passenger vehicles were raised by Rs 1,500Rs 3,500.
While the company registered a net profit of Rs 400 crore during the quarter as against a loss in the yearago period, adjusted net profit was down 6 per cent sequentially. The depreciation and interest costs were much higher than the year-ago period, but were nearly flat compared to the quarter ended September 2009.
A growth in volume can be triggered by pre-buying of commercial vehicles as new emission norms kick in from April 2010, suggest analysts. However, there could be some delays as there is a shortage of fuel needed for the new vehicles in some states.
On the passenger vehicle front, Tata Motors will depend on the Nano, the recently launched Indigo Manza and Sumo Grande MK-II to perk up sales. Management believes that the short-term challenges, that are likely to impact operations, are the hardening of interest rates, the withdrawal of stimulus and rising commodity prices.
Despite the drop in profits and margins, higher volume growth expected in the coming quarters and a likely improvement in Jaguar Land Rover performance seemed to have helped the stock gain 4 per cent to Rs 719 on Monday. It currently trades at 22x its FY11 consolidated earnings estimates.
source - BS
Tata Motors Ltd (updated - 05 Mar 2010)
Sustained sales growth in the domestic market and JLR’s turnaround are positive signs for Tata Motors, India’s largest commercial vehicle maker. Over the last one year, the company had been struggling to steady the ship, with problems ranging from repayment of loans taken for buying JLR to collapsing demand at home and overseas, besides the hiccups faced by its small car project. The last two quarters have indicated a reversal in fortunes.
First, the volumes. While domestic volumes have been rising consistently, the company’s UK-based subsidiary saw a healthy 28 per cent jump in the December quarter on the back of a pick-up in demand for the new Range Rover models. While Range Rover, which accounts for over three-fourth sales in volume terms, saw a 32 per cent jump in sales, Jaguar registered 11.5 per cent volume growth.
Higher volumes led to a 23 per cent sequential growth in consolidated sales to Rs 26,000 crore for the December quarter. Volume growth, higher realisations due to a better product mix and lower incentives helped JLR achieve a 38 per cent rise in revenue to Rs 13,524 crore.
Earnings before interest, depreciation, tax and amortisation margins at JLR improved to 9.8 per cent (from 3per cent in the September quarter) as operating leverage and benefits of cost-cutting measures kicked in. Despite the doubling of depreciation charges, JLR managed to post a profit of Rs 379 crore, as compared to a loss of Rs 414 crore in the September quarter. JLR will now pin hopes on the launch of its Jaguar XJ model to boost revenues and profits in the coming quarters.
Consequently, Tata Motors’ consolidated net profit was Rs 650 crore in the December quarter, as compared to Rs 22 crore in the September quarter (Rs 2,600 crore loss in the December 2008 quarter).
The stock has multiplied six times from its March 2009 lows, say analysts. At Rs 811, it is currently trading at a reasonable 14 times 2010-11 earnings estimate.
source - BS
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Tata Motors Ltd (updated - 08 July 2010)
As operations of subsidiaries move in line with expectations and the company gets a sales volume boost in the domestic market (it became the second-largest passenger car company in June), Tata Motors sets off on a new growth trajectory.
However, it needs to take care of the debt numbers on its balance sheet. According to a management note, the consolidated net debt-to-equity stands at 3.3:1, and has high cost components. The company had managed to lower its net debt-to-equity from around five times during the previous financial year to the current levels. Subsequently, the interest cost fell 58 per cent to around Rs 103 crore in FY10.
Earlier, the company had issued almost 30 million equity shares in the form of global depository receipts to raise around $375 million.
It also raised a similar amount by issuing four per cent convertible notes maturing in 2014. It had also given bondholders, with zero per cent Japanese ¥11,760 million and one per cent $300 million convertible bonds, an option to convert their bonds into ordinary shares during March 23-29. These plans were great successes and the company could extinguish almost $345 million of debt, say analysts.
Going ahead, the company has outlined a Rs 10,000crore plan for its growth strategy. It is seeking shareholders’ permission to raise Rs 4,700 crore though issue of securities, modalities for which are yet to be finalised. With this, the net worth of the company will improve, allowing it to raise further debt. The company will also be seeking an increase in the borrowing limits to Rs 30,000 crore from Rs 20,000 crore. This, however, might not be able to generate large funds, as it is already near the threshold.
Moreover, as the company gets into another expansionary mode, a 10 to 15 per cent equity dilution is expected in the next few years. However, the company will be in aposition to generate better cash inflows from operations this time than the earlier troubled years.
source - business standard
