TTMTAV230212

IndiaEquityResearch
Automobiles
February23,2012
TataMotors
ADD
TargetPrice(INR)
303
RobustgrowthinJLRdrivenbyemergingmarkets
JLR is likely to steer TTMTs business, with its increasing contribution
to consolidated total income and EBITDA over FY12fFY14f. We
estimate JLRs sales volumes to grow at a CAGR of 15% over FY12f
FY14f on the back of launches and robust growth in developing
countries. In the standalone business, we estimate domestic LCVs to
growataCAGRof20%overFY12fFY14f,ledbyrobustgrowthincargo
SCVs.WeestimatearecoveryindomesticMHCVsalesvolumegrowth
to 10% by FY13f on account of a pick up in investments due to the
likely reversal in the interest rate cycle. We have valued the
standalonebusinessbasedonthemeanvaluationsofthepreviousCV
cycle, while we have valued JLR at mean valuations of Audi AG. Our
Mar13TPstandsatINR303(upsideof13%).InitiatewithanAddrating.
Highercommodityandfuelpricesaretheriskfactors.
INITIATINGCOVERAGE
LastPrice(INR)
269
Bloombergcode
TTMTIN
Reuterscode
TAMO.BO
Avg.Vol.(3m)(mn)
17.9
Avg.Val.(3m)(INRbn)
3.79
52wkH/L(INR)
293/138
18,145
Sensex
MCAP(INRbn/USDbn)
722.55/14.68
Shareholding(%)
9/11
12/11
Promoters
31.1
31.1
MFs,FIs,Banks
20.1
19.3
FIIs
22.7
24.8
Public
Others
8.2
17.9
8.1
16.8
Growthindevelopingcountries,launchesextendgoodtimesforJLR
StockChart(RelativetoSensex)
Jaguar Land Rover (JLR) is witnessing robust sales volume growth due to the
growingacceptanceofits vehiclesindevelopingcountriessuchChina,Russia,
BrazilandIndia.Inaddition,successofproductssuchasEvoqueislikelytoaid
salesvolumegrowthforthecompany.WeestimateJLRssalesvolumestogrow
ataCAGRof15%overFY12fFY14f.
300
250
200
CargoSCVscontinuetodriveCVsalesvolumegrowth
StockPerfm.(%)
1m
3m
1yr
Absolute
22.5
55.7
18.1
WeestimatedomesticLCVstogrowataCAGRof20%overFY12fFY14f,ledby
robustgrowthincargoSCVs(CAGRof22%).RobustdemandforcargoSCVsis
ledbygrowthinlastmiletransportationand ashiftinpreferencefromcargo
threewheelers to SCVs. This segment contributed 76% of domestic LCV sales
volumes in FY11; we estimate this contribution to rise to 79% by FY14f. We
estimatedomesticMHCVsalesvolumegrowthtorecoverto10%byFY13fafter
moderation to singledigit growth in FY12f, on account of a pick up in
investmentactivityduetothelikelyreversalintheinterestratecycle.
Rel.toSensex
14.1
42.7
18.9
ForecastthreeyearCAGRof16%intotalincomeduetoJLR
03/11
03/12f
03/13f
1,231,333
1,594,303
1,741,912
33
29
14.4
14.1
14.5
90,426
107,407
113,968
3,339
3,339
3,339
A.EPS(INR)
27.1
32.2
34.1
YoY(%)
149
19
D/E(x)
1.2
0.8
0.5
150
100
Feb11
Jun11
Oct11
Tata Motors
Financials(INRmn)
Sales
YoY(%)
EBITDA(%)
A.PAT
Sho/s(diluted)
Feb12
Sensex Rebased
P/E(x)
9.9
8.3
7.9
EV/E(x)
6.1
4.8
4.3
RoCE(%)
RoE(%)
22
66
21
46
19
34
QuarterlyTrends
03/11
06/11
09/11
356 336 362 453
PAT(INRbn)
25
23
InitiatewithanAddratingandaMar13pricetargetofINR303
12/11
Sales(INRbn)
21
WeestimateconsolidatedtotalincometogrowataCAGRof16%overFY12f
FY14f, mainly led by JLRs increasing contribution. JLRs contribution to total
income is likely to rise from 57% in FY11 to 63% in FY14f. We estimate
consolidatedEBITDAandPATtogrowataCAGRof16%and12%,respectively,
overFY12fFY14f.WeestimatenegativefinancialleverageoverFY12fFY14fon
accountofhigherdepreciationandeffectivetaxrate.
36
WearriveatfairvaluesofINR113/shareandINR177/shareforthestandalone
and JLR businesses, respectively. We have valued the standalone business at
9.0x EV/EBITDA, based on the mean valuations of the previous CV cycle. We
havevaluedJLRat2.7xEV/EBITDA,basedonthethreeyear(20092011)mean
valuations of Audi AG (NSU GR, NR). We have valued other subsidiaries and
investments at INR13/share. Our Mar13 SOTPbased target stands at INR303,
whichprovidesan upsideof13%. Weinitiate coverageon TTMTwith anAdd
rating.Riskfactorsarehighercommoditypricesandfuelprices.
SriRaghunandhanNL,+9102266842863
raghunandhan.nl@avendus.com
Pleaserefertothedisclaimertowardstheendofthedocument.
India Equity Research
TataMotors
TableofContents
Investmentsummary......................................................................................................................... 3
Growthindevelopingcountries,launchesextendgoodtimesforJLR .................................................3
CargoSCVscontinuetodriveCVsalesvolumegrowth.........................................................................3
ForecastthreeyearCAGRof16%intotalincomeduetoJLR...............................................................3
InitiatewithanAddratingandaMar13pricetargetofINR303 ...........................................................3
Growthindevelopingcountries,launchesextendgoodtimesforJLR.............................................. 5
Stronggrowthduetorisingsalesindevelopingcountries.................................................................5
andproductlaunches .........................................................................................................................6
IndianpassengervehiclebusinesslikelytorecoverfromFY13f ...........................................................6
CargoSCVscontinuetodriveCVgrowth........................................................................................... 8
RobustgrowthofcargoSCVsinthedomesticmarket .......................................................................8
andinexportmarkets.........................................................................................................................9
MHCVgrowthlikelytorecoverfromFY13f...........................................................................................9
ForecastthreeyearCAGRof16%intotalincomeduetoJLR ......................................................... 11
StandalonesalesvolumegrowthledbyLCVs .....................................................................................11
RisingcontributionofJLRinconsolidatedtotalincome .....................................................................11
NegativefinancialleverageoverFY12fFY14f .....................................................................................12
Freecashflowandlowernetdebt/equitydespitehugecapex ..........................................................12
InitiatewithanAddratingandaMar13pricetargetofINR303 ..................................................... 14
Loweringcapitalizationratetoarriveatadj.EBITDAforJLR ..............................................................14
SOTPbasedtargetofINR303;initiatecoveragewithAddrating .......................................................14
Riskfactors ..........................................................................................................................................17
Financialsandvaluations(consolidated)......................................................................................... 18
Annexure:PVsalesvolumes,growthandtopplayers..................................................................... 21
Automobiles
TataMotors
Investmentsummary
JLRiswitnessingrobustsalesvolumegrowthonaccountofgrowingacceptanceofitsvehiclesindevelopingcountries.
Despiteaslowdownindevelopedcountries,JLRssalesvolumesarelikelytogrowataCAGRof15%overFY12fFY14f.
Inaddition,successfullaunchessuchasEvoquearelikelytocontributetogrowth.WeestimateEvoquetocontribute
more than c35% of JLRs sales volumes by FY14f. In the standalone business, domestic cargo SCV sales volumes are
witnessingrobustgrowthonaccountofgrowthinlastmiletransportationandashiftinpreferencefromcargothree
wheelerstoSCVsforfreightoperators.WeestimatedomesticLCVstogrowataCAGRof20%overFY12fFY14f,ledby
robustgrowthincargoSCVs.WealsoestimatearecoveryindomesticMHCVsalesvolumegrowthto10%byFY13fon
accountofapickupininvestmentactivityduetothelikelyreversalintheinterestratecycle.Meanwhile,weestimate
deteriorationinconsolidatedPATmarginsoverFY12fFY14f,implyingnegativefinancialleverageonaccountofhigher
depreciation and effective tax rate. We have valued the standalone business at 9.0x EV/EBITDA, based on the mean
valuations of the previous cycle. We have valued JLR at 2.7x EV/EBITDA, based on threeyear (20092011) mean
valuationsofAudiAG(NSUGR,NR).OurMar13SOTPbasedtargetstandsatINR303,whichprovidesanupsideof13%.
WeinitiatecoverageonTTMTwithanAddrating.Riskfactorsarehighercommoditypricesandfuelprices.
Weestimatethe
contributionofdeveloping
countriestosalesvolumes
toincreasefrom33.3%in
FY11to50.4%inFY14f.
Jaguar Land Rover (JLR) has been witnessing robust sales volume growth due to the growing
acceptance of its vehicles in developing countries. We estimate the contribution of developing
countries to sales volumes to increase from 33.3% in FY11 to 50.4% in FY14f. In addition, successful
launchofEvoqueislikelytopropelJLRssalesvolumes.WeestimateEvoquetocontributemorethan
c35% of JLRs sales volumes by FY14f. JLRs robust sales volume growth is likely to continue, with a
CAGRof15%overFY12fFY14f.WealsoestimatearevivalinTataMotors(TTMT)standalonedomestic
passenger vehicle (PV) sales volume growth to 10% by FY13f on account of launches and the likely
reversalintheinterestratecycle.
CargoSCVscontinuetodriveCVsalesvolumegrowth
DomesticcargoSCVsto
growataCAGRof22%
overFY12fFY14f.
Lightcommercialvehicles(LCVs)havebeendrivinggrowthincommercialvehicle(CV)salesvolumes,
whereas growth in LCVs has been driven by cargo small commercial vehicles (SCVs). We estimate
domestic cargo SCVs to grow at a CAGR of 22% over FY12fFY14f on account of growth in lastmile
transportationandashiftinpreferencefromcargothreewheelerstoSCVsforfreightoperators.We
alsoestimateTTMTtoreplicatethisgrowthinexportmarketsonaccountofgrowingacceptanceofits
cargoSCVsindevelopingcountries.Meanwhile,weestimatedomesticmediumandheavycommercial
vehicle (MHCV) sales volume growth to recover to 10% by FY13f after moderation to singledigit
growthinFY12f,onaccountofapickupininvestmentactivityduetothelikelyreversalintheinterest
ratecycle.Therehasalsobeenarevivalinsalesvolumegrowth(TTM)forLCVs;thisisusuallyalead
indicatorofarevivalinMHCVsalesvolumegrowth.
JLRscontributiontototal
incomeislikelyto
increasefrom57%inFY11
to63%inFY14f.
ConsolidatedtotalincomeislikelytogrowataCAGRof16%overFY12fFY14f,ledbyJLRsincreasing
contribution.JLRscontributiontototalincomeislikelytoincreasefrom57%inFY11to63%inFY14f.
WeestimateJLRandthestandalonebusinesstoreportaCAGRof19%and11%,respectively,intotal
income overFY12fFY14f. We estimateconsolidated EBITDA and PATto grow at aCAGR of 16% and
12%, respectively, over FY12fFY14f. We estimate deterioration in consolidated PAT margins over
FY12fFY14f, implying negativefinancialleverage on account of higherdepreciationandeffectivetax
rate.Meanwhile,TTMTsconsolidatednetdebt/equityislikelytodeclinefrom1.2xinFY11to0.3xin
FY14fonthebackofpositivefreecashflows.
Initiatecoveragewithan
AddratingwithaMar13
TPofINR303.
WehaveusedtheEV/EBITDAapproachtoarriveatafairvalueofINR113/shareandINR177/sharefor
thestandaloneandJLRbusinesses,respectively.WehaveadjustedJLRsEBITDAsothatitreflectsan
Automobiles
TataMotors
R&D capitalization rate similar to that of peers. We have valued the standalone business at 9.0x
EV/EBITDA, based on the mean valuations of the previous cycle. We have valued JLR at 2.7x
EV/EBITDA, based on threeyear (20092011) mean valuations of Audi AG (NSU GR, NR). We have
valued other subsidiaries and investments at INR13/share. Our Mar13 SOTPbased target stands at
INR303, which provides an upside of 13%. We initiate coverage on TTMT with an Add rating. Risk
factorsarehighercommoditypricesandfuelprices.
Exhibit1: OneyearforwardrollingEV/EBITDAandEV/EBITDAattargetprice
30
1yrFwdEV/EBITDA
TargetEV/EBITDA
AverageEV/EBITDA
20
10
0
Apr07
Feb08
Dec08
Oct09
Sep10
Jul11
May12
Mar13
Source:Bloomberg,AvendusResearch
Exhibit2: Valuationsummary
(INRmn)
Totalincome
EBITDA
NetProfit
EPS(INR)
P/E(x)
EV/EBITDA(x)
EV/Sales(x)
P/B(x)
Mar10
925,193 86,142 28,307
10.9
24.7
11.0
1.0
8.3
Mar11
1,231,333 177,800 90,426
27.1
9.9
6.1
0.9
4.5
Mar12f
1,594,303 224,797 107,407
32.2
8.3
4.8
0.7
3.1
Mar13f
1,741,912 252,577 113,968
34.1
7.9
4.3
0.6
2.2
Mar14f
1,900,106 275,515 127,245
38.1
7.0
3.7
0.5
1.8
Source:Company,AvendusResearch
Automobiles
TataMotors
JLR has been witnessing robust sales volume growth due to the growing acceptance of its vehicles in developing
countries. We estimate the contribution of developing countries to sales volumes to increase from 33.3% in FY11 to
50.4%inFY14f.Inaddition,successfullaunchofEvoqueislikelytopropelJLRssalesvolumes.WeestimateEvoqueto
contributemorethanc35%ofJLRssalesvolumesbyFY14f.JLRsrobustsalesvolumegrowthislikelytocontinue,with
aCAGRof15%overFY12fFY14f.WealsoestimatearevivalinTTMTsstandalonedomesticPVsalesvolumegrowthto
10%byFY13fonaccountoflaunchesandthelikelyreversalintheinterestratecycle.
Stronggrowthduetorisingsalesindevelopingcountries
Weestimatesales
volumesindeveloping
countriestogrowata
CAGRof32%overFY12f
FY14f.
Globalluxury vehicle sales volumes and value stoodat5.5mnandcUSD300bn,respectively, in 2010.

WehavearrivedatthesevaluesbyaggregatingsalesoftheTop10luxuryvehiclemanufacturers.JLR
contributesc4%andc5%ofgloballuxuryvehiclesalesvolumesandvalue,respectively.
WeestimateJLRssalesvolumestogrowataCAGRof15%overFY12fFY14fonaccountofthegrowing
contributionofdevelopingcountriesandproductlaunches.Thecontributionofdevelopingcountriesto
totalretailsalesvolumesislikelytoincreasefrom33.3%inFY11to50.4%inFY14fonaccountofrobust
salesvolumegrowthindevelopingcountries(CAGRof32%overFY12fFY14f).
Exhibit3: Retailsalesvolumebreakupacrossgeographies(%)
Country/Region
NorthAmerica
Europe,excludingRussiaandUK
UK
Russia
China
Others
Developedcountries
Developingcountries
Totalretailsalesvolumes(000s)
Totalincome(INRbn)
FY10
FY11
9MFY12
20.0
24.3
27.4
4.2
8.2
15.9
71.7
28.3
208.2
493.8
20.3
22.3
24.1
4.9
12.0
16.4
66.7
33.3
240.9
721.5
19.4
22.0
19.1
5.2
16.3
18.0
60.5
39.5
216.4
726.5
Source:Company
Faster growth in the population of high networth individuals (HNIs) in developing countries has
resultedinrobustdemandforluxuryvehicles.
Exhibit4: GrowthinHNIpopulation(%)
Developedregions/countries
NorthAmerica
Europe
Developingregions/countries
LatinAmerica
AsiaPacific
China
India
Brazil
Russia
2005
2010
2.85
2.80
0.30
2.35
0.32
0.08
0.11
0.10
3.44
3.12
0.50
3.34
0.54
0.15
0.16
0.13
CAGRover20052010
4
2
11
7
11
13
7
5
Source:CapgeminiWorldWealthReport2005and2010
JLR is planning to set up national sales companies and assembly/manufacturing plants in developing
countriestotakeadvantageoftherobustdemandinthesemarkets.Thesestepsarelikelytofurther
reducethedependenceondevelopedcountries.
Automobiles
TataMotors
andproductlaunches
WeestimateEvoqueto
contributemorethan
c35%ofJLRssales
volumesbyFY14f.
JLRs latest product offering, Evoque, has received strong order bookings across the world. We
estimateEvoquetocontributemorethan35%ofJLRssalesvolumesbyFY14f.ThelaunchofEvoque
hasfurtherstrengthenedthelowerendofJLRsproductportfolio.
JLRisplanningtospendGBP0.5bneveryyearoverthenextfewyearsonnewproductdevelopment.
Exhibit5: Scheduleforproductlaunches
Model
Remarks
2012
2012
2013
2013
2014
2014
2015
2017
2018
2020
2023
XFestateandfacelift
XEsportscar
XJfacelift
NewXK
Compactsaloon
Crossover
NewXF
XJCoupe
ThirdgenerationalloyXJ
SecondgenerationXE
ThirdgenerationXK
IncompetitiontoPorscheBoxster
IncompetitiontoBMW3series
IncompetitiontoBMW5series
Source:Company
Exhibit6: Worldwideproductportfolio
Brand
Models
Jaguar
LandRover
XF
XJ
XK
Defender
Freelander2
Evoque
Discovery4
RangeRoverSport
RangeRover
PriceRange(GBP)*
28,22847,555
48,68682,490
57,07197,000
20,18531,660
20,81333,959
27,95444,315
36,50949,181
45,43969,447
65,36681,228
Source:CompanyNote:*OnroadpricesinUK
IndianpassengervehiclebusinesslikelytorecoverfromFY13f
TTMTsdomesticPVsales
volumesarelikelyto
witnessafallof1%in
FY12f.
IncontrasttorobustgrowthinJLR,TTMTsdomesticPVsalesvolumesarelikelytowitnessafallof1%
in FY12f on account of rising competition and interest rates. The Indian PV industry has 19 players,
including3playersthatenteredthemarketinthepastthreeyears.ThePVindustrycanbedividedinto
passengercars,utilityvehiclesandmultipurposevehicles.Increasingcompetitionhasresultedinlower
marketshareforTTMTinpassengercarsandutilityvehicles.
Exhibit7: DomesticpassengercarmarketsharefortheTop3players(%)
FY06
FY07
FY08
FY09
FY10
FY11 FY12ytd
MarutiSuzuki
51.7
51.0
51.4
52.2
50.1
48.7
HyundaiMotorIndia
17.9
18.1
18.0
20.0
20.6
18.1
19.8
TataMotors
17.1
16.6
13.9
13.2
13.2
12.9
12.7
42.1
Source:SocietyofIndianAutomobileManufacturers(SIAM)
Exhibit8: DomesticutilityvehiclemarketsharefortheTop3players(%)
FY06
FY07
FY08
FY09
FY10
FY11 FY12ytd
Mahindra&Mahindra
43.2
40.8
42.4
47.2
55.2
52.5
ToyotaKirloskarMotor
18.9
19.8
19.7
17.0
19.7
20.0
18.3
TataMotors
19.5
21.7
20.3
18.5
13.0
13.6
12.5
55.6
Source:SIAM
Automobiles
TataMotors
Exhibit9: DomesticmultipurposevehiclemarketsharefortheTop3players(%)
FY06
FY07
FY08
FY09
FY10
FY11 FY12ytd
MarutiSuzuki
100.0
100.0
89.0
73.1
67.4
75.2
62.3
TataMotors
0.0
0.0
11.0
26.9
32.6
24.2
26.7
Mahindra&Mahindra
0.0
0.0
0.0
0.0
0.0
0.4
11.0
Source:SIAM
WehaveanalyzedthecompetitionintensityusingtheHerfindahlIndex.Thisindexshowsanincreasein
competition,especiallyoverthepastthreeyears,aftertheentryofnewplayers.
Exhibit10: HerfindahlIndex
HerfindahlIndexindicates
anincreaseincompetition
intensity.
FY06
FY07
FY08
FY09
FY10
33
33
32
33
32
Passengercars
Utilityvehicles
Multipurposevehicles
FY11 FY12ytd
29
24
27
26
27
29
37
34
36
100
100
80
61
56
62
47
Source:SIAM,AvendusResearchNote:Lowerindexvalueindicateshighercompetition.
AnotherimpactofhighercompetitionistheincreasingsalespromotionexpenditureforTTMT.
Exhibit11: Salespromotionexpenditureasapercentageoftotalincome(%)
Salespromotionexpenditureasa%oftotalincome
FY06
FY07
FY08
FY09
FY10
FY11
3.7
3.9
4.1
4.8
4.7
4.8
Source:Company
In addition to rising competition, headwinds such as commodity inflation and interest rates are also
likelytoimpactsalesvolumesinFY12f.Commodityinflationhasresultedinac5%hikeinvehicleprices
overthepast12months.Growinginterestrateshavealsonegativelyimpactedsalesvolumesas60%
65% of vehicles are financed (Source: Mahindra & Mahindra). As per our analysis, the inverse
correlationbetweenPVsalesvolumesandinterestratesstandsatc55%.
Exhibit12: TrendinmonthlypassengervehiclegrowthandSBINsprimelendingrate
Asperouranalysis,the
inversecorrelation
betweenPVsalesvolumes
andinterestratesstands
atc55%.
GrowthinPVsalesvolumes(%)
SBINprimelendingrate(%)(RHS)
60
16
40
14
20
12
10
20
Jan07
Jan08
Jan09
Jan10
Jan11
8
Jan12
Source:StateBankofIndia,SIAM,AvendusResearch
WeestimateTTMTsPV
salesvolumegrowthto
improveto10%byFY13f.
Note:StateBankofIndia(SBININ,Buy)
WeestimateTTMTsPVsalesvolumegrowthtoimproveto10%byFY13fonaccountoflaunchesand
thelikelyreversalintheinterestratecycle.WeestimateTTMTsdomesticPVsalesvolumestogrowat
aCAGRof6%overFY12fFY14f.
Automobiles
TataMotors
CargoSCVscontinuetodriveCVgrowth
LCVs have been driving growth in CV sales volumes, whereas growth in LCVs has been driven by cargo SCVs. We
estimate domestic cargo SCVs to grow at a CAGR of 22% over FY12fFY14f on account of growth in lastmile
transportation and a shift in preference from cargo threewheelers to SCVs for freight operators. We also estimate
TTMT to replicate this growth in export markets on account of growing acceptance of its cargo SCVs in developing
countries.Meanwhile,weestimatedomesticMHCVsalesvolumegrowthtorecoverto10%byFY13faftermoderation
tosingledigitgrowthinFY12f,onaccountofpickupininvestmentactivityduetothelikelyreversalintheinterestrate
cycle.Therehasalsobeenarevivalinsalesvolumegrowth(TTM)forLCVs;thisisusuallyaleadindicatorofarevivalin
MHCVsalesvolumegrowth.
RobustgrowthofcargoSCVsinthedomesticmarket
TTMTwitnessedaCAGRof26%initscargoSCVlessthan3.5tonnegrossvehicleweight(GVW)sales
volumes over FY07FY11, due to increased usage of these vehicles in lastmile transportation of the
distribution chain under the hub and spoke model. Lastmile transportation refers to cargo
transportation for a distance of less than 50km. In addition, a shift in preference from cargo three
wheelerstoSCVsforfreightoperatorshasalsoaddedtothedemand.
Exhibit13: MarketshareinthedomesticcargoSCVsegment(%)
FY06
FY07
FY08
FY09
FY10
FY11
TataMotors
59.4
68.6
64.8
60.5
57.2
56.0
57.5
Mahindra&Mahindra
38.0
29.1
28.6
32.1
35.8
38.1
36.2
PiaggioVehicles
0.0
0.0
3.1
6.1
5.2
3.4
3.3
ForceMotors
2.6
2.2
3.5
1.3
1.7
2.4
0.0
0.1
AshokLeyland
HindustanMotors
0.0
0.1
0.0
FY12ytd
1.7
1.3
0.1
0.0
Source:SIAM
TTMTisthemarketleaderinthedomesticcargoSCVsegmentwith57.5%marketshareinFY12year
todate.Inanefforttoretainthismarketshare,thecompanyhaslaunchedcargoSCVsoflessthan1.5
tonneGVWinMay11.ThetilttowardscargoSCVsmayincreasefurtherduetointroductionofthese
vehicles.These1.5tonneGVWcargovehiclesarefasterandhavemarginallyhigherloadingcapacities
thanexistingcargothreewheelers.Asperouranalysis,profitabilityisalsohigherforthesevehicles.
1.5tonneGVWcargoSCVs
havehigherprofitabilityin
comparisontothree
wheelers.
Exhibit14: AnnualincomestatementforanSCVandacargothreewheelerforafreightoperator
(INR)
SCVTataAceZip(1.29tonnes)
Cargo3WBajajGCMax(0.99tonnes)
Revenues
392,229
316,584
Fuelcost
100,464
78,284
Salary
120,000
120,000
Maintenance
11,702
9,250
Roadtaxes,tollsetc
72,000
60,000
49,051
EBITDA
88,063
EBITDAMargin(%)
22.5%
15.5%
Interest
16,116
12,740
Depreciation
17,552
13,875
Tax
36,716
15,144
PAT
17,678
7,292
PATMargin(%)
RoE(%)
Onroadprice(Mumbai)
4.5%
2.3%
15.1%
7.9%
234,000
185,000
Source:AvendusResearchNote:Basedonsamplesurveyoffreightoperators
Automobiles
TataMotors
We estimate domestic LCV sales volumes to grow at aCAGRof20% overFY12fFY14f, ledby robust
growthincargoSCVs(CAGRof22%).ThecontributionofcargoSCVstodomesticLCVsalesvolumesis
likelytoincreasefrom75.7%inFY11to79.4%inFY14f.
Exhibit15: EstimateddomesticcargoSCVsalesvolumesandcontributiontoLCVvolumes
FY06
FY07
FY08
FY09
FY10
FY11 FY12f
FY13f
FY14f
121.4 152.2 197.9
231.5
273.2
78.0
79.4
DomesticcargoSCVvolumes(000s)
48.0
90.6
101.8
89.2
CargoSCVsas%ofdomesticLCVvolumes(%)
55.7
72.0
75.9
74.2
72.5
75.7
77.2
Source:SIAM,AvendusResearch
andinexportmarkets
Cargo SCVs became an important part of the domestic LCV market after their introduction in FY06.
TTMTistryingtoreplicatethesamesuccessinotherdevelopingcountries.ThecompanysLCVexport
volumesgrewataCAGRof8%overFY07FY11,mainlyledbygrowthincargoSCVs(CAGRof14%).We
estimate export volumes of cargo SCVs to grow at a CAGR of 24% over FY12fFY14f, which is higher
than historical growth, due to the growing acceptance of these vehicles in developing countries.
Meanwhile, TTMT is also planning to set up assembly units for cargo SCVs in Indonesia, Brazil and
EasternEurope.
WeestimateexportvolumesofLCVstogrowataCAGRof23%overFY12fFY14f,ledbyrobustgrowth
incargoSCVs.ThecontributionofcargoSCVstoLCVexportvolumesislikelytoincreasefrom76.5%in
FY11to83.6%inFY14f.
Exhibit16: EstimatedexportvolumesofcargoSCVsandcontribution
FY06
FY07
FY08
FY09
FY10
FY11 FY12f
ExportvolumesofcargoSCVs(000s)
13.0
14.0
14.5
7.7
10.8
24.9
32.4
FY13f
38.8
FY14f
46.6
CargoSCVsasa%ofexportvolumesofLCVs(%)
59.3
59.6
55.6
45.3
72.3
76.5
83.2
83.3
83.6
MHCVgrowthlikelytorecoverfromFY13f
Weestimatedomestic
MHCVsalesvolume
growthtorecoverto10%
byFY13f.
We estimate singledigit growth in domestic MHCV sales volumes in FY12f due to postponing of
purchasesbyfreightoperatorsonaccountoflowerroadfreightavailability.Inaddition,theexpiryof
theJawaharlalNehruNationalUrbanRenewalMissionschemeinDec11isalsolikelytoimpactsales
volumes.
We estimate TTMTsgrowthtorevive from FY13f on account of apick up ininvestment activity and
freightavailabilityduetothelikelyreversalintheinterestratecycle.Therehasalsobeenarevivalin
salesvolumegrowth(TTM)forLCVs;thisisusuallyaleadindicatorofarevivalinMHCVsalesvolume
growth.Asperourobservation,arevivalinLCVsalesvolumegrowthisusuallyfollowedbyarevivalin
MHCV sales volume growth with a lag of 46 months. In line with this hypothesis, after LCV sales
volumes saw a revival in Jun11, MHCV sales volume growth (TTM) recovered in Oct11. Meanwhile,
TTMT is also ramping up disbursements from its financing division Tata Motors Finance to aid its
salesvolumegrowth.WeestimateTTMTsdomesticMHCVsalesvolumestogrowataCAGRof11%
overFY12fFY14f,marginallyhigherthantheindustryCAGRof10%.
Exhibit17: DomesticMHCVsalesvolumegrowthforTTMTandindustry(%)
FY07
FY08
FY09
FY10
FY11
FY12f
FY13f
FY14f
TTMT
34.7
4.2
31.5
36.5
23.8
8.7
10.2
14.1
CAGR(FY07FY11) CAGR(FY12fFY14f)
8.3
11.0
Industry
32.8
0.4
33.2
33.5
31.7
6.3
10.0
13.9
9.2
10.1
Automobiles
TataMotors
Exhibit18: DomesticMHCVmarketshare(%)
FY06
FY07
FY08
FY09
FY10
FY11
FY12f
FY13f
FY14f
AL
27.0
27.9
27.5
25.7
23.3
25.7
23.3
23.0
22.7
EIM*
7.4
6.8
8.2
7.4
8.6
9.4
10.8
10.8
10.6
TTMT
62.0
62.9
60.5
61.9
63.3
59.5
60.8
60.9
61.0
Source:SIAM,AvendusResearchNote:*IncludestradedvehiclesofVolvoAB
DomesticCVsalesvolumesareestimatedtogrowataCAGRof16%overFY12fFY14f,ledbyaCAGRof
20%and11%inLCVsandMHCVs,respectively.
Automobiles
10
TataMotors
ConsolidatedtotalincomeislikelytogrowataCAGRof16%overFY12fFY14f,ledbyJLRsincreasingcontribution.JLRs
contributiontototalincomeislikelytoincreasefrom57%inFY11to63%inFY14f.WeestimateJLRandthestandalone
businesstoreportaCAGRof19%and11%,respectively,intotalincomeoverFY12fFY14f.Weestimateconsolidated
EBITDA and PAT to grow at a CAGR of 16% and 12%, respectively, over FY12fFY14f. We estimate deterioration in
consolidatedPATmarginsoverFY12fFY14f,implyingnegativefinancialleverageonaccountofhigherdepreciationand
effectivetaxrate.Meanwhile,TTMTsconsolidatednetdebt/equityislikelytodeclinefrom1.2xinFY11to0.3xinFY14f
onthebackofpositivefreecashflows.
StandalonesalesvolumegrowthledbyLCVs
WithdrawalofDEPB
benefitsunlikelytohavea
significantimpacton
exportvolumes.
ThestandalonebusinesshasbeenwitnessingrobustvolumegrowthinLCVsincomparisontoMHCVs
andPVs.Weestimatethistrendtocontinue,withaCAGRof20%,11%and6%indomesticLCV,MHCV
andPVsalesvolumes,respectively,overFY12fFY14f.Therobustexportvolumegrowth(CAGRof12%
overFY12fFY14f)inthestandalonebusinessislikelytocontinueonaccountofgrowingacceptanceof
IndianCVsindevelopingcountries,despitepricehikes.WithdrawalofexportincentivessuchasDuty
EntitlementPassBook(DEPB)arelikelytoonlyresultinpricehikesincargoCVs,aspassengerCVsand
PVs were not part of the DEPB scheme. Export of cargo CVs stood at a meager 2.2% of total sales
volumesinFY11.
Overall (includes LCV, MHCV, PV and exports) sales volume growth for the standalone business is
estimatedataCAGRof11%overFY12fFY14f.
Exhibit19: Estimatedvolumesandtotalincome
Standalonebusiness
FY11
FY12f
DomesticLCVvolumes(000s)
201,018
FY13f
256,376
FY14f CAGRoverFY12fFY14f(%)
296,795
343,957
19.6
11.0
DomesticMHCVvolumes(000s)
192,127
208,799
230,180
262,634
DomesticPVvolumes(000s)
352,180
350,974
385,607
423,663
6.4
58,048
59,531
69,882
82,073
12.2
Totalvolumes(000s)
803,373
875,680
982,465
1,112,326
11.5
Totalincome(INRmn)
480,405
533,933
588,073
665,184
11.5
Exportvolumes(000s)
Source:SIAM,Company,AvendusResearch
RisingcontributionofJLRinconsolidatedtotalincome
JLRssalesvolumegrowthoverFY12fFY14fishigherthanthatofthestandalonebusiness.JLRssales
volumesarelikelytogrowataCAGRof15%onthebackoflaunchesandrobustgrowthindeveloping
countries.WeestimateconsolidatedtotalincometogrowataCAGRof16%overFY12fFY14f,mainly
ledbygrowthinJLR.
Exhibit20: Estimatedsalesvolumesandtotalincome
FY11
FY12f
FY13f
JaguarLandRover
Totalvolumes(000s)
243,621
306,407
337,048
370,752
15.0
Totalincome(INRmn)
721,490
1,033,356
1,123,192
1,200,625
18.5
Consolidated
Totalincome(INRmn)
1,231,333 1,594,303 1,741,912
1,900,106
15.6
JLRcontributed57%ofconsolidatedtotalincomeinFY11;weestimatethiscontributiontoincreaseto
63%byFY14f.
Automobiles
11
TataMotors
NegativefinancialleverageoverFY12fFY14f
EBITDA margins are likely to broadly remain at similar levels over FY12FY14f. Although there is a
decline inEBITDA marginsin thestandalonebusiness on accountofhigherinput costs,thisnegative
impacthasbeenfullyoffsetbyhigherEBITDAmarginsinJLR.JLRscontributiontoEBITDAislikelyto
increasefrom69.1%inFY11to77.6%inFY12f.
Exhibit21: EstimatedEBITDAmargins(%)
FY13f
FY14f
9.9 7.5 8.3
FY11
8.5
JaguarLandRover
16.3
17.9 18.2
18.2
Consolidated
14.4
14.1 14.5
14.5
Standalone
FY12f
We estimate negative financial leverage over FY12fFY14f. Consolidated PAT growth is likely to be
lowerthanEBITDAgrowthonaccountofhigherdepreciationandeffectivetaxrateinJLR.
Negativefinancial
leverageoverFY12fFY14f.
Exhibit22: Estimatedconsolidatedtotalincome,EBITDAandPAT
(INRmn)
Totalincome
EBITDA
PAT
FY11
FY12f
FY13f
1,231,333
1,594,303
1,741,912
1,900,106
15.6
177,800
224,797
252,577
275,515
15.7
90,426
107,407
113,968
127,245
12.1
ThehigherdepreciationinJLRisonaccountofthehugecapex(GBP1.5bnperyear)plannedoverthe
nextfewyears.TheeffectivetaxrateforJLRisestimatedtoincreaseonaccountofincorporationof
national sales companies (NSCs). JLR has been setting up NSCs in several developing countries to
benefitfromrobustdemandinthesemarkets.AstheseNSCsareliabletopaytax,theoveralleffective
taxrateforJLRislikelytoincreasefrom7%inFY11to21%inFY14f.
Freecashflowandlowernetdebt/equitydespitehugecapex
The company is incurring huge capex (INR450bn) over FY12fFY14f. This capex is mainly in JLR on
accountoftheincreasedfocusonnewproductdevelopment.
Exhibit23: Estimatedfreecashflowandnetdebttoequity
80,000
1.2
FCF(INRmn)
Netdebttoequity(x)RHS
60,000
0.9
40,000
0.6
20,000
0.3
0
FY11
FY12f
FY13f
0.0
FY14f
Automobiles
12
TataMotors
Exhibit24: Trendinconsolidatedcapitalexpenditure
(INRmn)
Consolidatedcapitalexpenditure
Capexasa%ofnetfixedassets(%)
FY06
FY07
FY08
FY09
12,592
27,588
52,804
99,708
23
37
41
28
FY10
FY11
FY12f
FY13f
FY14f
81,240 84,754 156,881 157,960 142,014

21
20
29
25
21
WeestimateTTMTtomeetitscapexrequirementsfrominternalaccrualsandreportpositivefreecash
flows over FY12fFY14f. On account of positive free cash flows and conversion of convertible
alternativereferencesecurities,weestimatethenetdebt/equitytoreducefrom1.2xinFY11to0.3xin
FY14f.
Automobiles
13
TataMotors
WehaveusedtheEV/EBITDAapproachtoarriveatafairvalueofINR113/shareandINR177/shareforthestandalone
andJLRbusinesses,respectively.WehaveadjustedJLRsEBITDAsothatitreflectsanR&Dcapitalizationratesimilarto
that of peers. We have valued the standalone business at 9.0x EV/EBITDA, based on the mean valuations of the
previouscycle.WehavevaluedJLRat2.7xEV/EBITDA,basedonthreeyear(20092011)meanvaluationsofAudiAG.
We have valuedother subsidiaries andinvestments atINR13/share.OurMar13 SOTPbased target stands at INR303,
whichprovidesanupsideof13%.WeinitiatecoveragewithanAddrating.Riskfactorsarehighercommoditypricesand
fuelprices.
Loweringcapitalizationratetoarriveatadj.EBITDAforJLR
TTMTcapitalizesmostofitsR&DexpenditureinJLR(81.7%capitalizedinFY11).Asthecapitalization
rate for European peers is lower, we have lowered the capitalization rate for JLR to 50% in our
estimatestoarriveatadjustedEBITDAoverFY12fFY14f.
Thecapitalizationratefor
peersisuptoc50%in
Europeancompanies.
Exhibit25: R&DcapitalizationrateinEuropeancompanies(%)
R&DcapitalizationrateinFY11/2010
AudiAG
33.1
BMWAG
34.3
DaimlerAG
28.3
Exhibit26: EstimatedAdj.EBITDAinforJLR
FY11
FY12f
FY13f
FY14f
EBITDA
(INRmn)
117,903
186,009
204,915
218,775
Adj.EBITDA
102,862
152,212
170,847
185,828
WeusethisadjustedEBITDAinourEV/adj.EBITDAapproachforvaluingJLR.
SOTPbasedtargetofINR303;initiatecoveragewithAddrating
Wevaluethestandalonebusinessof TTMTatanEV/EBITDAof9.0x, basedon meanvaluations over
thepreviousCVcycle.WeapplythismultipletoarriveatafairvalueofINR113/share.
Exhibit27: TTMTsstandaloneoneyearforwardrollingEV/EBITDAandEV/EBITDAattargetprice
21
1yrFwdEV/EBITDA
AverageEV/EBITDA
Target1yrfwdEV/EBITDA
14
0
Apr07
Feb08
Dec08
Oct09
Sep10
Jul11
May12
Mar13
Automobiles
14
TataMotors
The earnings growth over FY12fFY14f is lower than historical (FY08FY11) growth on account of
moderationindomesticMHCVandPVsalesvolumesinFY12f.Weestimatethistrendtoreverseover
FY13fFY14f;earningsgrowthislikelytoberobust(CAGRof26%)overFY13fFY14fonaccountofthe
likelyrecoveryindomesticMHCVandPVsalesvolumegrowth.
Exhibit28: ComparisonofhistoricalandfuturegrowthofTTMTsstandalonebusiness
EarningsgrowthataCAGR
of26%overFY13fFY14f.
(%)
Totalincomegrowth
EBITDAgrowth
*EPSgrowth
CAGRoverFY08FY11
14.9
9.5
9.8
CAGRoverFY12fFY14f
11.5
6.0
8.5
CAGRoverFY13fFY14f
11.6
18.8
25.8
Source:Company,AvendusResearchNote:*AvendusEPS
WehavevaluedtheJLRbusinessat2.7xEV/EBITDA,basedonthreeyear(20092011)meanvaluations
ofNSU.Applyingthismultiple,wearriveataMar13fairvalueofINR177/shareforJLR.
AlthoughJLRissmallerinsizeincomparisontoNSU,earningsgrowthissignificantlyhigheroverFY12f
FY14f.
Exhibit29: SizecomparisonbetweenJLRandNSU
(FY11/2010)
Salesvolumes
Totalincome(INRmn)
243,621
9,905
1,293,453
30,413
JaguarLandRover
AudiAG(NSU)*
Source:Company,Bloomberg,AvendusResearchNote:*YearendingDecember
Exhibit30: ComparisonofgrowthofJLRandNSUsbusinesses
Totalincomegrowth
EBITDAgrowth
EPSgrowth
NSUCAGRover20082010
(%)
1.8
3.7
16.1
NSUCAGRover2011f2012f
2.4
4.2
0.8
JLRCAGRoverFY12fFY14f*
15.4
19.6
14.8
Source:Bloomberg,AvendusResearchNote:*JLRnumbersconvertedtoEURforcomparison
Exhibit31: NSU'soneyearforwardrollingEV/EBITDA
6
1yrFwdEV/EBITDA
AverageEV/EBITDA
0
Jan09
Jun09
Nov09
Apr10
Sep10
Feb11
Jul11
Dec11
We have valued other subsidiaries and investments at INR13/share. Our Mar13 SOTPbased target
standsatINR303,whichprovidesanupsideof13%.WeinitiatecoverageonTTMTwithanAddrating.
AtourMar13TP,thestocktradesatanEV/EBITDAof4.2x
Automobiles
15

Initiatecoveragewithan
AddratingwithaMar13
TPofINR303.
TataMotors
Exhibit32: SOTPvaluation
Stake
held
9xEV/EBITDA
378,052
113
100% 2.7xEV/EBITDA
590,617
177
1xP/ABV
24,079
9xP/E
20,895
Standalone
JaguarLandRover
TataMotorFinance 100%
TMLDrivelines
Basisof Equityvalue Value/shareRationale

valuation
(INRmn)
(INR)
85%
Total
303
DiscounttopreviousCVcycle'smean
EV/EBITDA
BasedonNSU'sthreeyear(20092011)mean
EV/EBITDA
DiscounttoMahindra&MahindraFinancial
Services'(MMFSIN,Add)threeyearmean
P/ABV
DiscounttoAutomotiveAxles(ATXLIN,NR)
previousCVcycle'smeanP/E
Source:AvendusResearch
Exhibit33: OneyearforwardrollingEV/EBITDAandEV/EBITDAattargetprice
30
1yrFwdEV/EBITDA
TargetEV/EBITDA
AverageEV/EBITDA
20
10
0
Apr07
Feb08
Dec08
Oct09
Sep10
Jul11
May12
Mar13
Automobiles
16
TataMotors
Riskfactors
Rise in raw material prices: We have assumed stable raw material cost per vehicle over FY12f
FY14f. If the prices of steel, aluminum and rubber increase, then the companys margins and
demandarelikelytobeadverselyaffected.
Riseinfuelprices:AnincreaseinfuelpricesislikelytoleadtopostponementofCVpurchasesby
freightoperators,asitnegativelyimpactstheirmargins.
Exhibit34: SensitivityanalysisImpactonearningsonaccountof1%declinein:
(%)
FY12f
FY13f
FY14f
Standalonesalesvolumes
0.4
0.4
0.5
Standaloneblendedrealizations
4.6
4.4
4.5
2.8
2.6
2.7
JLRsalesvolumes
1.1
1.0
0.9
JLRblendedrealizations
5.2
5.1
5.0
4.5
3.9
3.8
Standalonerawmaterialcostpervehicle
JLRrawmaterialcostpervehicle
Source:AvendusResearch
Exhibit35: RelativevaluationsasonFebruary22,2012
AL
CMP Rating TargetPrice Upside PriceChange(%)

P/E
EV/E ROCE(%) ROE(%)
(INR)
(INR)
(%)
1m
3m
6m 2012f/ 2013f/ 2014f/ 2012f/ 2013f/ 2014f/
2012f/ 2012f/
FY12f FY13f FY14f FY12f FY13f FY14f
FY12f
FY12f
28
Buy
41
46
5.4
13.1
11.3
12.8
10.7
9.2
8.9
7.8
6.8
10.2
14.3
EIM*
1724
Add
1918
11
6.9
7.8
27.1
11.9
9.7
7.7
9.5
7.4
5.4
21.5
24.0
TTMT
268
Add
303
13
22.5
55.7
82.1
8.3
7.9
7.0
4.8
4.3
3.7
21.3
45.6
Source:Bloomberg,AvendusResearchNote:*YearendingDecember,ProportionateshareofEIMinVECVconsideredforratios
Automobiles
17
TataMotors
Financialsandvaluations(consolidated)
Incomestatement(INRmn)
Fiscal yearending
Grosssal es
Less:Exciseduty
Netsal es
Ot her operati ngincome
Totaloperatinginco me
Totaloperatingexpenses
Netmateri als
Ot her directcosts
Personnel
SG&A
R&D
EBITDA
Ot her income
Depreciat ion
EBIT
Interest
RecurringPB T
Netextraor dinaryitems
PBT(reported)
Totaltaxes
PAT(repor ted)
Add:Shareo f earningsofassociat e
Less:Minorityi nterest
Pri orperiod items
Netincome(reported)
Avendusnetincome
Divi dend +Distributiontax
Sh aresoutstanding(mn)
Avendus dilutedshares(mn)
AvendusEPS (INR )
03/10
949,416
30,482
918,935
6,258
925,193
839,051
624,613
41,257
87,518
81,366
4,297
86,142
17,931
43,853
60,220
22,397
37,822
2,596
35,226
10,058
25,169
845
303
0
25,711
28,307
03/11
1,267,125
42,863
1,224,262
7,071
1,231,333
1,053,533
803,199
47,761
93,427
102,505
6,641
177,800
896
56,180
122,516
20,454
102,062
2,310
104,372
12,164
92,208
1,014
485
0
92,736
90,426
03/12f
1,641,541
55,529
1,586,013
8,290
1,594,303
1,369,506
1,044,269
63,241
119,573
132,621
9,803
224,797
1,767
68,679
157,885
23,794
134,091
5,273
128,818
27,052
101,766
1,312
944
0
102,134
107,407
03/13f
1,793,524
60,670
1,732,854
9,058
1,741,912
1,489,335
1,137,469
68,708
128,902
144,248
10,009
252,577
967
80,585
172,960
22,887
150,073
2,111
152,184
36,524
115,660
1,434
1,015
0
116,079
113,968
03/14f
1,956,405
66,180
1,890,226
9,881
1,900,106
1,624,591
1,240,769
74,948
140,608
158,342
9,924
275,515
967
90,585
185,898
18,339
167,559
2,216
169,775
40,746
129,029
1,564
1,132
0
129,461
127,245
10,019
14,813
14,910
17,233
21,905
2,532
3,189
3,189
3,294
3,294
2,601
3,339
3,339
3,339
3,339
10.9 27.1 32.2 34.1 38.1
Growthratios(%)
Totaloperat ingincome
EBITDA
EBIT
RecurringPB T
Avendus net income
Avendus EPS
30.4
292.0
NM
NM
NM
NM
33.1
106.4
103.4
169.8
219.5
148.8
29.5
26.4
28.9
31.4
18.8
18.8
9.3
12.4
9.5
11.9
6.1
6.1
9.1
9.1
7.5
11.7
11.6
11.6
Operatingratios(%)
EBITDA margi n
EBITmar gin
Netpr ofitmargin
Ot her income/PBT
Effectiv e Taxrate
9.3
6.5
3.0
47.4
28.6
14.4
9.9
7.3
0.9
11.7
14.1
9.9
6.7
1.3
21.0
14.5
9.9
6.5
0.6
24.0
14.5
9.8
6.7
0.6
24.0
Automobiles
18
TataMotors
Balancesheet(INRmn)
Fiscal yearending
Equity capital
Preferencecapital
Reserves andsurpl us
Net worth
Mino rity interest
Totaldebt
Deferredtax liability
Totalliabilit ies
Grossblock
less:Accumulateddepreciati on
Netblock
CW IP
Goodwill
Investments
Cash
Inventories
Debtors
Loans andadvances
less:Currentliabilities
less:Prov isions
Network ingcapital
Totalassets
03/10
5,706
0
76,359
82,065
2,135
351,084
13,448
448,731
638,228
342,324
295,904
89,159
34,229
22,191
87,433
113,120
71,912
151,991
340,773
76,435
7,248
448,731
03/11
6,377
0
185,338
191,715
2,466
327,914
14,638
536,733
714,629
396,987
317,643
117,289
35,848
25,443
109,479
140,705
68,774
191,391
371,147
98,692
40,511
536,733
03/12f
6,377
0
272,562
278,939
3,410
351,914
14,638
648,901
871,510
454,182
417,328
117,289
34,056
25,443
129,012
179,685
88,543
221,655
465,416
98,692
54,787
648,901
03/13f
6,589
0
390,395
396,983
4,425
301,987
14,638
718,034
1,029,470
523,133
506,336
117,289
32,263
25,443
118,814
212,196
104,567
233,727
531,586
101,015
36,703
718,034
03/10
25,711
43,853
0
44,630
17,931
96,262
37,363
319
9,936
0
2,958
17,931
26,092
0
1,345
10,019
13,079
21,752
48,418
03/11
92,736
56,180
0
11,217
896
136,803
104,531
1,905
1,347
0
1,619
896
108,505
0
23,170
14,813
31,885
6,098
22,200
03/12f
102,134
68,679
0
5,257
1,767
174,302
156,881
0
0
0
1,792
1,767
153,321
0
24,000
14,910
10,539
1,449
19,532
03/13f
116,079
80,585
0
7,886
967
203,582
157,960
0
0
0
1,792
967
155,200
0
49,927
17,233
8,581
58,579
10,197
03/14f
6,589
0
497,951
504,539
5,557
221,987
14,638
746,721
1,171,483
602,097
569,386
117,289
30,471
25,443
95,878
228,050
114,152
246,664
574,924
105,687
4,133
746,721
Cashflowstatement(INRmn)
Fiscal yearending
Netpr ofit
Depreciat ion
Deferredtax
W orkingcapital changes
Less:Otheri ncome
Cashflowfrom operations
Capitalexpendi ture
St rat egicinvestmentspurchased
Marketableinvestmentspurchased
Changeinot herloansandadvances
Goodwill paid
Ot her income
Cashflowfrom investing
Equity raised
Changeinbor rowings
Divi dendspaid(incl.tax)
Ot her s
Cashflowfrom financing
Net change incash
03/14f
129,461
90,585
0
9,633
967
228,712
142,014
0
0
0
1,792
967
139,254
0
80,000
21,905
10,489
112,394
22,937
Automobiles
19
TataMotors
KeyRatios
Fiscal yearending
Valuationratios(x)
P/E (o nAv endusEPS)
P/E (o nbasic,reportedEPS)
P/CEPS
P/BV
Divi dend yield(%)
Marketcap. /FCF
Marketcap. /Sales
EV/Sales
EV/EBITDA
EV/FCF
EV/TotalAssets
NetCash/ Mar ketcap.
Pershareratios(IN R)
Avendus EPS
EPS(Basic,r eported)
Cash EPS
Book Value
Divi dend pershare
RO E Decomposition(%)
EBITmar gin
Assettur nover(x)
Interestexpenserati o
Tax retent ionratio
RO A
Totalassets/equity (x)
RO E
Returnratios (%)
EBIT/CapitalEmploy ed
RO CE
RO IC
FC F/IC
OCF/Sales
FC F/Sal es
Turnoverratios (x)
Grossturnover
Nettur nover
Revenue/IC
Inventory /Sales(day s)
Receivables(days)
Payab les(days)
W orkingcapital cycle(ex cash)(days)
Solvencyratios(x)
Grossdebttoequity
Netdebtto equit y
Netdebtto EBITDA
InterestCov erage (EBIT /Interest)
03/10
03/11
03/12f
03/13f
03/14f
24.7
26.4
9.7
8.3
1.3
11.1
0.7
1.0
11.0
15.4
2.1
14.4
9.9
9.2
6.1
4.5
1.5
28.6
0.7
0.9
6.1
36.0
2.0
14.2
8.3
8.4
5.1
3.1
1.5
37.7
0.5
0.7
4.8
47.8
1.7
16.5
7.9
7.6
4.6
2.2
1.7
20.3
0.5
0.6
4.3
24.7
1.5
14.8
7.0
6.8
4.1
1.8
2.1
10.5
0.5
0.5
3.7
12.1
1.4
12.2
10.9
10.2
27.7
32.4
3.4
27.1
29.1
43.9
60.1
4.0
32.2
32.0
52.7
87.5
4.0
34.1
35.2
58.3
120.5
4.5
38.1
39.3
65.2
153.2
5.7
6.5
2.1
5.2
71.4
6.6
6.4
42.2
9.9
2.5
4.2
88.3
18.4
3.6
66.1
9.9
2.7
4.0
79.0
18.1
2.5
45.6
9.9
2.5
3.3
76.0
16.7
2.0
33.7
9.8
2.6
2.5
76.0
17.4
1.6
28.2
14.0
10.3
16.8
23.3
10.7
6.6
24.9
22.0
38.8
10.7
10.9
2.4
26.6
21.3
36.7
6.6
11.3
1.4
25.3
19.2
30.5
10.1
11.6
2.5
25.4
19.3
28.5
17.0
11.9
4.4
1.4
3.1
3.5
43.9
23.6
164.2
22.8
1.7
3.9
4.4
37.6
20.9
157.2
22.1
1.8
3.8
4.6
36.7
18.0
142.0
16.4
1.7
3.4
4.0
41.1
20.2
155.4
16.4
1.6
3.3
3.8
42.3
21.0
158.1
16.7
4.5
3.3
3.1
2.7
1.8
1.2
1.2
6.0
1.3
0.8
1.0
6.6
0.8
0.5
0.7
7.6
0.5
0.3
0.5
10.1
Automobiles
20
TataMotors
Annexure:PVsalesvolumes,growthandtopplayers
FY07
FY08
FY09
FY10
FY11
CAGR%(FY07FY11)
Totalsalesvolumes(000s)
Passengercars
1269.2
1414.8
1551.0
1968.5
2430.1
10.5
Domesticsalesvolumes(000s)
1076.4
1203.7
1219.5
1526.8
1982.7
10.2
12.2
Exportsalesvolumes(000s)
192.7
211.1
331.5
441.7
447.4
Totalsalesvolumegrowth(%)
20.6
11.5
9.6
26.9
23.4
Domesticsalesvolumegrowth(%)
22.0
11.8
1.3
25.2
29.9
Exportsalesvolumegrowth(%)
13.4
9.5
57.0
33.2
1.3
Exportsaspercentageoftotalsalesvolume(%)
15.2
14.9
21.4
22.4
18.4
549.3
618.2
636.7
765.5
966.4
Top3Players
MarutiSuzuki
HyundaiMotorIndia
194.9
216.3
244.0
315.0
358.9
TTMT
179.0
167.1
160.4
201.4
256.2
MarutiSuzuki
20.4
12.5
3.0
20.2
26.2
9.6
HyundaiMotorIndia
23.5
11.0
12.8
29.1
13.9
10.4
TTMT
18.6
6.7
4.0
25.5
27.2
7.5
MarutiSuzuki
51.0
51.4
52.2
50.1
48.7
HyundaiMotorIndia
18.1
18.0
20.0
20.6
18.1
TTMT
16.6
13.9
13.2
13.2
12.9
Domesticmarketshare(%)
Utilityvehicles
FY07
FY08
FY09
FY10
FY11
CAGR%(FY07FY11)
224.6
251.6
228.8
275.6
328.0
7.2
220.2
245.3
225.8
272.7
324.2
7.3
4.4
6.3
3.0
2.8
3.8
3.2
19.0
12.9
12.0
9.0
20.4
13.2
11.4
7.9
20.8
18.9
1.9
42.7
51.6
7.1
34.2
2.0
2.5
1.3
1.0
1.2
89.7
103.9
106.5
150.6
170.2
Top3Players
Mahindra&Mahindra
43.6
48.2
38.3
53.7
64.9
TTMT
47.9
49.7
41.8
35.5
44.2
6.8
15.8
2.5
41.5
13.0
18.7
10.7
20.5
40.2
20.8
7.8
TTMT
26.4
3.8
15.9
15.1
24.5
4.8
40.8
42.4
47.2
55.2
52.5
Mahindra&Mahindra
9.1
Mahindra&Mahindra
19.8
19.7
17.0
19.7
20.0
TTMT
21.7
20.3
18.5
13.0
13.6
Automobiles
21
TataMotors
Multipurposevehicles
FY07
FY08
FY09
FY10
FY11
CAGR%(FY07FY11)
84.4
101.9
107.8
151.9
215.8
15.0
83.1
100.9
106.6
150.3
213.5
15.1
9.5
1.3
1.0
1.2
1.6
2.3
25.1
20.7
5.8
40.9
42.1
25.2
21.4
5.7
40.9
42.1
21.7
24.4
15.3
39.1
41.8
1.6
1.0
1.1
1.1
1.1
Top3Players
MarutiSuzuki
83.1
89.7
77.9
101.3
160.6
TTMT
0.0
11.1
28.7
48.9
51.8
Mahindra&Mahindra
0.0
0.0
0.0
0.0
0.9
13.1
30.0
58.5
11.1
157.4
70.7
5.8
NM
MarutiSuzuki
25.2
8.0
TTMT
NM
NM
Mahindra&Mahindra
NM
NM
NM
NM
NM
NM
MarutiSuzuki
100.0
89.0
73.1
67.4
75.2
TTMT
0.0
11.0
26.9
32.6
24.2
Mahindra&Mahindra
0.0
0.0
0.0
0.0
0.4
Automobiles
22
TataMotors
AnalystCertification
Thefollowinganalyst(s)is(are)primarilyresponsibleforthisreportand,certifies(y)thattheopinion(s)onthesubjectcompany(ies)anditssecurity(ies)andanyotherviewsor
forecastsexpressedhereinaccuratelyreflecttheirpersonalview(s).Theyfurthercertifythatnopartoftheircompensationwas,isorwillbedirectlyorindirectlyrelatedtothe
specificrecommendation(s)orviewscontainedinthisresearchreport:SriRaghunandhanNL
Disclosures
MeaningofAvendusSecuritiesPrivateLimitedsequityresearchratings
Theratingrepresentstheexpectedchangeinthepriceofthestockoverahorizonof12months.
Buy:morethan+20%
Add:+10%to+20%
Hold:10%to+10%
Reduce:10%to20%
Sell:lessthan20%
Proportionofratingsineachcategoryandinvestmentbankingrelationships
AttheendofDecember2011
Buy
Add
Hold Reduce
Sell
NR
Total
Proportionofratingsineachcategory
32%
24%
29%
7%
0%
7%
100%
0%
13%
5%
0%
0%
20%
6%
Proportionofcompaniestowhommaterialinvestmentbankingserviceswereofferedduringtheprevious12months
Analystdisclosures
None of the analysts involved in the preparation of this research report or a member of his/her household is an officer, director or supervisory board member of any of the
company(ies)thatis/arethesubjectofthisresearchreport.Noneoftheanalystsinvolvedinthepreparationofthisresearchreportormembersofhis/herhouseholdholdany
financialinterestinthesecuritiesofthecompany(ies)thatis/arethesubjectofthisresearchreport.Noneoftheanalystsinvolvedinthepreparationofthisresearchreporthave
receivedorpurchasedsharesofthesubjectcompanypriortothepublicofferingofthoseshares
DisclosuresonpotentialconflictsofinterestforAvendusSecuritiesPrivateLimitedand/oritsassociatecompanies(Avendus)asonFebruary21,2012
Asontheabovementioneddate,theshareholdingsofAvendusdoesnotexceed5%ofthetotalissuedsharecapitalofTataMotorsLimited(TTMT).Avendusdoesnotholdany
otherfinancialinterestinTTMTthatissignificantwithregardtotheresearchrecommendation.Asontheabovementioneddate,theshareholdingsofTTMTdoesnotexceed5%of
thetotalissuedsharecapitalofAvendus.Avendusisnotamarketmakerorliquidityproviderinthesecuritiesoftherelevantissuerorinanyrelatedderivatives.Avendushasnot
beenaleadmanagerorcoleadmanagerofapubliclydisclosedofferofsecuritiesofTTMTorinanyrelatedderivativesoverthepast12months.Overthepast12months,Avendus
hasnotbeenpartytoanagreementwithTTMTwithregardtotheprovisionofotherinvestmentbankingservicesthatdonotentailthedisclosureofanyconfidentialcommercial
information.Avendusisnotpartytoanagreementwiththesubjectcompany(ies)ofthisresearchreportwithregardtotheproductionofthisresearchreport.
Sharepricehistoryandratingchanges
310
TTMT(InitiatedonFeb23,12)
Rating,Date,TP(INR)
Add,23Feb12,303
250
190
130
Feb11
Apr11
Jun11
Jul11
Sep11
Nov11
Dec11
Feb12
Automobiles
23
TataMotors
Disclaimer
ThisdocumenthasbeenpreparedbyAvendusSecuritiesPrivateLimited(ASPL).Thisdocumentismeantfortheuseoftheintendedrecipientonly.Thoughdisseminationtoall
intendedrecipientsissimultaneous,notallintendedrecipientsmayreceivethisdocumentatthesametime.Thisdocumentisneitheranoffernorsolicitationforanoffertobuy
and/orsellanysecuritiesmentionedhereinand/orofficialconfirmationofanytransaction.Thisdocumentisprovidedforassistanceonlyandisnotintendedtobe,andmustnot
betakenas,thesolebasisforaninvestmentdecision.Theuserassumestheentireriskofanyusemadeofthisinformation.Eachrecipientofthisdocumentshouldmakesuch
investigationashedeemsnecessarytoarriveatanindependentevaluation,includingthemeritsandrisksinvolved,forinvestmentinthesecuritiesreferredtointhisdocument
andshouldconsulthisownadvisorstodeterminethemeritsandrisksofsuchinvestment.Theinvestmentdiscussedorviewsexpressedmaynotbesuitableforallinvestors.This
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Automobiles
24

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IndiaEquityResearch

356 336 362 453

India Equity Research

India Equity Research

India Equity Research

925,193 86,142 28,307

1,231,333 177,800 90,426

1,594,303 224,797 107,407

1,741,912 252,577 113,968

1,900,106 275,515 127,245

India Equity Research

Globalluxury vehicle sales volumes and value stoodat5.5mnandcUSD300bn,respectively, in 2010.

India Equity Research

India Equity Research

India Equity Research

India Equity Research

121.4 152.2 197.9

India Equity Research

India Equity Research

1,231,333 1,594,303 1,741,912

India Equity Research

9.9 7.5 8.3

India Equity Research

81,240 84,754 156,881 157,960 142,014

India Equity Research

India Equity Research

India Equity Research

Basisof Equityvalue Value/shareRationale

India Equity Research

CMP Rating TargetPrice Upside PriceChange(%)

India Equity Research

India Equity Research

India Equity Research

India Equity Research

India Equity Research

India Equity Research

India Equity Research

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