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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

Tata Motors Ltd (updated - 21 Sept 2010)
The sales of Jaguar Land Rover (JLR) in the seasonally lean month of August posted a volume growth of 29 per cent yearon-year (y-o-y) to 16,220 units. Sales in the US and other geographies were also in line with expectations. Year-todate, total Jaguar Land Rover sales have touched 92,759 units, up 46 per cent y-o-y. Religare Research expects JLR’s monthly sales to touch 19,400 units. Analysts also show conviction in the management’s sales guidance of 240,000 units in FY11, with China picking up over 25,000 units.

The demand for its commercial vehicles (CV) segment is strong, paralleling the uptick in industrial production. Analysts expect sales to grow over 15 per cent, as truck freight rates improve and operators replace older vehicles. Sales of Light CV are expected to increase faster than truck sales, with most new launches catering to the demand.

Tata Motors is running at 65 per cent utilisation of its truck and car manufacturing capacities and about 90 per cent of its LCV (mainly Ace) capacity. Thus, it has adequate capacity to leverage the increasing demand, with the ability to increase Ace production by 20 per cent if it adds a third shift at its Uttaranchal facility, according to the Daiwa report.

Even after two price hikes earlier this year (1.2 per cent each in April and June) and another planned in October, earnings before interest, tax, depreciation and amortisation (Ebitda) margins are expected to come under pressure. The company is expected to absorb some part of the five-per-cent increase in costs due to the changeover in emission norms in October. Additionally, resurgence in input costs may also hurt margins.

On the JLR front, Tata Motors expects a capex of about £800 million over the next two years, which may increase with a changeover in emission norms in Europe (due in 2012). The stock has appreciated 76 per cent over the past one year, but analysts believe there is still some wind in these sails derived by the expected uptrend in the CV demand and JLR sales growth.
source - business standard

Tata Motors Ltd (updated - 11 Aug 2010)
Tata Motors has several reasons to cheer its June quarter results.

First, volume growth in almost all businesses, domestic as well as international. Second, management of costs, especially of raw materials. And, the favourable currency movement, which helped the Jaguar Land Rover business double its revenue and record a net profit of around £221 million.

The launch of Jaguar XJ has been a success and operations are working at around 80 per cent utilisation levels. A favourable currency movement has also aided profitability. Raw material consumption declined to 63 per cent of net revenue during the quarter, as compared with 68.3 per cent in the corresponding quarter of the previous year. On a consolidated basis, operating profit rose 563 per cent to Rs 3,900 crore and margins stood at 14.6 per cent, much better than the singledigit number in some of the earlier quarters. Standalone margins, however, remained flat at around 11.3 per cent.

Though the commercial vehicles market fell a bit sequentially, volume growth remained robust at 38 per cent, with more than a lakh vehicles sold in the quarter.

The passenger car segment showed strong performance, as the company managed to sell around 77,751 cars and saw its overall market share jump to 14.3 per cent from 12.3 per cent a year ago. The success of Indica Manza is seen as a major contributor to this performance. The company’s share in the midsized car segment has grown from 25 per cent to around 39 per cent.

There are some concerns though. The management says rising commodity prices may impact margins in the second half of the financial year. The rise in prices of commercial vehicles after emission norms change in September is another concern. However, volume growth and streamlining of costs are positives. Details of fund-raising plans and the extent of equity dilution are going to be the next triggers.
source - business standard

Tata Motors Ltd (updated - 13 Nov 2010)
Tata Motors’ consolidated September quarter results were above expectations, with revenues jumping 36 per cent year-on-year (y-o-y) to

`28,782 crore, while the net profit spurted to `2,223 crore from `22 crore in the period a year before. The jump in profits was largely due to Jaguar Land Rover’s (JLR’s) performance, which recorded its fourth consecutive quarter of net profit.

The UK-based subsidiary saw a 24 per cent y-o-y jump in volumes on strong showing in the Chinese and Russian markets, and good response to the new Jaguar XJ. Realisations at JLR were up seven per cent, due to an improved product and regional mix and a drop in discounts. Operating leverage and lower fixed cost helped JLR grow its Ebitda (earnings before interest, taxes, depreciation and amortisation) margins by 110 baiss points, quarter-onquarter (q-o-q), to 16.6 per cent. The key concern for the company continues to be weak European sales outlook.

While JLR’s performance helped improve the UK-based subsidiary’s margins, Indian operations suffered a margin dip (110 bps sequentially, to 9.7 per cent) due to higher raw material costs, higher staff costs and other expenditure. The management believes the price increases and cost reduction efforts should help improve margins. The company affected a 0.5-3.5 per cent rise in commercial vehicles (CVs) in October and `9,000 on the Nano this month. Analysts say although the freight rates are healthy and demand strong, a rise in interest rates could cause drop in CV volumes. Higher raw material costs could squeeze margins further.

On the revenues front, the standalone business registered a growth of 41.5 per cent to `11,450 crore on the back of 31 per cent jump in volumes. While commercial vehicle sales grew 28 per cent, passenger car volumes were up 37.5 per cent on the back of higher Nano, Manza and Vista sales. The growth continued in October with sales volumes up by 21 per cent y-o-y. The company is banking on higher sales of the newly launched crossover vehicle, Aria, and the refreshed Safari to be launched next year. In the commercial vehicle segment, the company plans to launch BS-III range across products and new variants for its light commercial vehicle segment.

Post the qualified institutional placement (QIP) in October, the company has been able to bring down its debt to equity ratio to 1.16 times from 1.73 times at the end of the September quarter. With cash at roughly $2 billion at the end of September, Tata Motors should be able to meet its capex requirements, especially at JLR ($800 million-$1 billion annually). At Friday’s closing price of `1,245.55, the stock trades at eight times its consolidated 2011-12 earnings, and could fetch 14 per cent returns over the next year, analysts say.
source - business standard