Stellar JLR 3QFY2014 performance highlights and results update
February 12, 2014, Wednesday, 07:51 GMT | 02:51 EST | 12:21 IST | 14:51 SGT
Stellar JLR results offsets weak standalone performance: Tata Motors (TTMT) reported stellar results for 3QFY2014, significantly beating consensus as well as our expectations. The results were once again driven by an impressive Jaguar and Land Rover performance (JLR), which posted record EBITDA margins of 17.9%, higher than our expectations of 15.8%. The standalone operations deteriorated further posting an operating loss of Rs.459cr, against our expectations of a marginal profit of Rs.48cr, largely due to negative operating leverage following steep decline in volumes (down 36.1% yoy and 13.9% qoq) and increase in discounts and promotional spends.
The consolidated top-line registered a better-than-expected growth of 38.6% yoy (12.3% qoq) to Rs.63,877cr driven by a stellar revenue growth of 61.1% yoy (17.7% qoq) at JLR in INR terms. JLR performance continues to ride on a robust 22.7% and 14.1% yoy growth in volumes and net average realization respectively and aided further by the translation gains on account of the INR depreciation against the GBP. The consolidated EBITDA margin continued to surprise positively and stood at 15.6% (up 330bp yoy and 39bp qoq), substantially ahead of our estimates of 13.8%. The operating performance was led by JLR, which posted record EBITDA margins of 17.9% led by superior product and geography mix and operating leverage benefits. Consequently the adjusted net profit increased 173.7% yoy (29.2% qoq) to Rs.4,929cr.
Outlook and valuation: We expect headwinds in the standalone business to continue in the near term due to weak macro-economic environment which is expected to continue impacting domestic volumes. However, we expect JLR to sustain its strong performance driven by continued momentum in the global luxury vehicle market and aided further by the strong product launch pipeline and the success of the newly launched models. We are building in an ~14% volume CAGR for JLR and an earnings CAGR of ~30% over FY2013-15E, considering a superior product mix, favourable geography mix and operating leverage benefits. We retain our Buy rating on the stock with an SOTP based target price of Rs.451.