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Tata Motors: Bet Shifts To Land Rover
Tata Motors: Bet Shifts To Land Rover
Stock Data
Tata Motors
No. of shares : 385m
Market cap : Rs 208.2bn
52 week high/low : Rs 840 / Rs 523
Avg. daily vol. (6mth) : 1.1mn shares
Bloomberg code : TTMT IB
Reuters code : TELC.BO
Rs 540
Shareholding (%) Mar-08 QoQ chg
Relative to Sector: Neutral Target Price: Rs 613
Promoters : 33.4 0.0
FIIs : 17.0 (0.5) Potential Upside: 14%
MFs / UTI : 2.6 (0.6)
Banks / FIs : 14.8 1.0
Others : 32.2 0.2
Relative Performance
180
Sahil Kedia
sahil.kedia@enam.com (+91 22 6754 7621) June 7, 2008
1
Table of contents
Slide No.
 Investment Summary 3
Impact of JLR: Funding & valuation 4
What can swing TAMO? 6
TAMO: Long term efforts remain intact 7
 Existing Businesses 15
M&HCV 19
Passenger cars 24
Subsidiaries and exports 31
 Financials 35
 Valuation Comparison 42
2
Investment summary
 JLR a USD 2.3bn Catch? FY10 Contribution: Bet now on JLR…
JLR to add USD 15bn in revenues of which LR contributes ~65% 100
%
60% of revenues for TAMO will accrue from outside India, and
80
we believe that TAMO’s valuations hinge on a turnaround in JLR
60
 Volumes for Land Rover hold the key
40 58
LR volumes are expected to be under pressure in FY09 as 23
3
Structure and funding
SPV structure Earnings composition
SPV Structure Revenues
600 (Rs bn)
Tata Motors
400
100%
As
Asaaresult
result 200
SPV 1 (Singapore)
0
Leverage
Leverage FY08 FY09 FY10
USD 0.7bn remains
towards Wcap
remains Standalone Subsidiaries JLR
SPV 2 (UK)
healthy
healthyatat
100% + 0.6x
0.6xononaa 40
EBITDA
(Rs bn)
JLR USD 2.3bn paid consolidated
consolidated 30
to Ford
basis
basis 20
=
10
Expected
Expectedtoto
0
raise
raisedebt
debtatat FY08 FY09 FY10
USD 3bn bridge loan
JLR
JLRlevel
level Standalone Subsidiaries JLR
PAT
20
(Rs bn)
15
USD 1.8bn through USD 500mn equity ~USD 700mn
rights issue + offer overseas + balance through debt
10
5
Rights assumed 0
at 35% discount (5)
Rs 22bn Rights issue Rs 20bn Rights issue Rs 30bn Rights issue to CMP (Rs 350) (10)
implying a 2:1 FY08 FY09 FY10
of equity shares of ‘A’ equity shares of 5yr 0.5% CPS
ratio Standalone Subsidiaries JLR
Our estimates do not take any impact of the Nano into account.
Value of JLR (b) 7,291
Volumes (%)
Land Rover
192,436 (15.00) 41,089 42,357 43,624 44,891 46,159
profitable at the EBITDA level. 203,756 (10.00) 46,000 47,267 48,534 49,802 51,069
We expect volumes for LR to be under 215,075 (5.00) 50,910 52,177 53,445 54,712 55,980
226,395 - 55,821 57,088 58,355 59,623 60,890
pressure in USA & UK due to a shift in
consumer preferences on account of high oil TP (Rs) Jaguar Volumes (%)
Conso 66,534 69,558 72,582 75,606 78,631
prices. 10.0 15.0 20.0 25.0 30.0
181,116 (20.00) 468 483 498 513 528
Volumes (%)
Revenues (USD mn) Jaguar Volumes (%)
Land Rover
JLR 66,534 69,558 72,582 75,606 78,631 192,436 (15.00) 526 541 556 571 586
10.0 15.0 20.0 25.0 30.0 203,756 (10.00) 584 599 613 628 643
181,116 (20.00) 12,729 12,880 13,032 13,184 13,335 215,075 (5.00) 641 656 671 686 701
Volumes (%)
Land Rover
192,436 (15.00) 13,316 13,468 13,619 13,771 13,922 226,395 - 699 714 729 744 758
203,756 (10.00) 13,903 14,055 14,206 14,358 14,509 Source: Company, ENAM Research
215,075 (5.00) 14,490 14,642 14,794 14,945 15,097
226,395 - 15,078 15,229 15,381 15,532 15,684
Assumed at an EV/EBITDA target of 6x on an
EBITDA (USD mn) Jaguar Volumes (%) FY09E basis
JLR 66,534 69,558 72,582 75,606 78,631
10.0 15.0 20.0 25.0 30.0 P/E re-rating expected as clarity on the
181,116 (20.00) (84) (53) (21) 11 43 profitability of JLR emerges
Volumes (%)
Land Rover
6
Long term efforts remain intact
Existing New
Product Partners Remarks
Geographies Geographies
CV (Goods)
India, Russia USA IVECO, Italy (FIAT Subsidiary) Expected to launch Global truck platform for
S. Africa EU TDCV, Korea – 100% developed markets by Q3FY09
Korea, Middle ownership (Korea’s #2 truck)
East etc.
India, Russia Latin America Hispano Carrocera, Spain Recently launched Marco-polo bus range in
(Passenger)
S. Africa Europe 21% stake (Bus & Coach India
Korea, Middle manufacturer) Is expected to start assembly operations in
CV
East etc. Marco Polo, Brazil 51:49 JV Latin America & Africa.
(Global leader in Bus Body New plant at Dharwad in Karnataka expected to
Building) start operations by H2FY09
India Fiat 50:50 JV (To manufacture Expansion of production and engines at Ranjangaon
(Small)
Africa cars and engines in India) New Indica - II & Nano to be launched in
Cars
Europe - Q3FY09
Expect 2-3 models from Tata-Fiat by FY10
US China Jaguar & Land Rover Has launched XF in EU and USA in March.
(Big)
Cars
Europe India (Acquired from Ford for USD Allows TAMO to access world-class power-train and
2.3bn) chassis technology
CNG variant to be launched by FY10
Capacity expansion at Uttarkhand facility
Pick-ups
India Thailand Thonburi, Thailand 70:30 JV Recently Launched Xenon in Thailand (Largest
UV &
8
JLR: A USD 2.3bn catch?
 TAMO acquired JLR for USD 2.3bn
JLR has a turnover of USD 15bn (~2x of TAMO revenues in FY08), with a product profile which is completely different
to TAMO’s existing line of business
There are no apparent short term visible synergies between the two companies
An expected >60% of revenues will accrue from the developed markets where TAMO has very little experience
 TAMO doesn’t have cash on the B/S to burn for R&D, unlike other global auto majors
10
Jaguar: The trouble maker?
 A premium luxury car brand Volumes and global presence
Has a portfolio of 5 models including its flagship model the 150,000 120
(No.s) (No.s)
XJ manufactured at three plants in UK. 120,000 100
Main competitors include BMW, Mercedes Benz, Audi, 80
Porsche etc. 90,000
60
60,000
 Acquired by Ford in 1989 for USD 2.5bn 40
Acquired to compete against Toyota’s Lexus brand 30,000 20
Ford is believed to have invested over USD 10bn in the
0 0
company to improve the production facilities. 2003 2004 2005 2006 2007
Volumes (LHS) No. of markets (RHS)
 Jaguar has been struggling to find a mass
market model over the last few years
Jaguar is in the process of changing the complete product Regional distribution of volumes (%)
profile, starting with the launch of the XF. 100
11
Poised to turnaround?
 Jaguar XF: The savior? Product portfolio overhaul
XF was launched in Mar 2008 in USA and UK to Model Volume in Change (Model + Year)
replace the S-Type. CY07 (No.s)
X-Type 23,331 To be phased out in 2010, replacement
It has received a number of accolades from across
S-Type 14,710 Replaced by XF in 2008
the world and was awarded “Car of the year” by XJ 10,455 New version expected in 2010
‘What Car’ magazine in Europe for 2008. XFR/ XKR N.A. Supercharged version of XF and XK to
be launched in 2009
XF Coupe N.A. Expected to be launched in 2010
 XF has already received 18,000 pre- F-type N.A. Expected to be launched in 2011-12
bookings in US and UK Source: Company, ENAM Research
Realisation
Mondeo platform have not yielded results 48,510 970 1,213 1,455 1,698 2,183
(USD)
With a product overhaul expected in the coming 49,500 990 1,238 1,485 1,733 2,228
50,490 1,010 1,262 1,515 1,767 2,272
years, outlook for Jaguar is positive
51,500 1,030 1,287 1,545 1,802 2,317
As per industry experts Jaguar needs to clock annual
volumes of 100k for operations to turn around. (USD mn) Volumes (No.s)
EBITDA 20,000 25,000 30,000 35,000 45,000
 However, R&D costs to escalate 4% 40 50 59 69 89
Margin (%)
EBITDA
5% 50 62 74 87 111
Product overhaul will require an increased spend on
5% 50 62 74 87 111
R&D over the next three-four years
8% 79 99 119 139 178
We estimate that Jaguar will require in excess of USD 10% 99 124 149 173 223
1bn towards R&D costs in the coming 3-4 years Source: ENAM Research
12
Scale of operation needs to ramp up
Model wise volumes in 2007 Product overhaul
JLR BMW Merc Audi Jaguar: Product pipeline
X-Type 23,331 1 Series 165,803 A/B Class 275,100 A3 230,849
Model Change (Model + Year)
S-Type 14,710 3 Series 555,219 C-Class 386,500 A4 322,517
XJ 10,455 5 Series 230,845 E-Class 234,600 A6 234,215
S-Type Replaced by XF in 2008
XK 11,989 7 Series 44,421 S-Class 85,500 A8 21,362
XFR/ XKR Supercharged version of XF and XK to be
Freelander 66,582 Z4/6 Series 48,009 CL 10,700 TT/R8/A5 73,276
launched in 2009
Defender 23,154 X3 111,879 ML 139,900 Q7 81,775 X-Type To be phased out in 2010, replacement
Discover 47,522 X5 120,617 GL 40,200 unlikely
RR Sport 58,836 X6 NA XJ New version expected in 2010
Range Rover 30,299
XF Coupe Expected to be launched in 2010
F-type Expected to be launched in 2011-12
Geographical break-up
Land Rover: Product pipeline
Country AUDI BMW MERC Jaguar Land Rover
US 82,169 335,840 253,400 16,620 53,422 Model Change (Model + Year)
UK 100,712 173,685 NA 18,730 50,664 LRX Expected to be launched by 2011, to
Europe 432,466 703,123 682,300 35,486 84,747 meet EU emission norms
China 101,996 51,588 26,900 1,000 9,320 Discovery New Gen expected by 2011
Russia 36,073 14,686 15,300 1,000 - Freelander New Gen expected by 2012
Others 311,097 408,740 305,400 - 27,737 Range New Gen expected by 2013
India 350 1,387 2,600 - 70 RR Sport New Gen expected by 2014
Global 964,151 1,500,678 1,285,900 60,485 226,395
Defender New Gen expected by 2014
Source: Autocar, ENAM Research
Source: Media Reports, ENAM Research
150,000
 2012 deadline will be difficult to meet…
Major EU emission norm change in 2012 (to 130g/ km) 100,000
will be a major hurdle for all manufacturers 50,000
None of the current JLR products adhere to the 2012
standards. Penalties can be significant: 0
` Jaguar X-Type emits 149gm/km = £1,292 as penalty Hummer GMC Jeep Lexus USA Europe
` Land Rover RR emits 376gm/km = £16,728 as penalty 2007 2008
Niche players such as JLR are hopeful of some respite/
Source: AECA, Bloomberg, ENAM Research
exemption from the new norms due to low volumes. Note: Jeep and LR (Europe) volumes are till April-08
 …will lead to ballooning R&D costs R&D: Critical for all players
JLR’s combined R&D spend expected to be in excess of 10,000 15
(USD mn) (%)
USD 1.5bn over the next two years. 8,000 12
6,000 9
 Pension fund is fully funded… for now
Ford to contribute USD 600mn towards pension deficit 4,000 6
Next actuarial study to be conducted in 2009. 2,000 3
0 0
 Royalty payments to Ford remain unclear
GM
Toyota
Honda
BMW
Daimler
Ford
Audi
Porsche
VW
Retail financing could be an issue going ahead as Ford
has extended its retail financing to JLR for one year.
R&D Expenditure (LHS) % of sales (RHS)
Source: Bloomberg, ENAM Research
14
Existing Business
High interest rates and inflation; slowing recovery in volumes
15
Existing products: Rough ride ahead
 Testing times back home
High inflation and possibility of a slowdown in the domestic economy, looms over profitability
16
TAMO: Capex plans
 TAMO has outlined an aggressive capex plan of Rs 100bn over the next 3-4 years
Small Car
We believe the capex is imperative for TAMO as most of its products are dated
17
New platform launches
 TAMO intends to spend Rs 100bn over a period of 3-4 yrs towards development of
new platforms across product categories.
Indica V2 Dicor
(Jan-08)
Indigo CS
(Jan-08)
19
Domestic CV: Slowdown to continue?
Commercial Vehicles: Domestic growth (YoY) over the last 18 years
40
(%)
30
20
10
0
(10)
(20)
(30)
(40)
FY09E
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
M&HCVs LCVs Total CV
20
Freight rates under pressure
 FY09 under pressure on account of Freight rate and Diesel prices
1.80
Firm interest rates and growing NPAs (Rs/ tkm)
1.50
` Crisil has downgraded ICICI’s CV loan pool to
1.20
BB-, as a result of increasing NPAs.
0.90
Rise in fuel costs with global price of oil rising 0.60
sharply 0.30
` Petrol prices raised by Rs 5/litre 0.00
` Diesel prices raised by Rs 3/litre
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Softening of ban on overloading already
being witnessed in some states
Avg. freight rate(rs/tKM) Avg. Diesel prices
65%
65%
64%
63%
62%
61%
With all major global players adding capacity,
20%
raising prices will be difficult
` Eicher-Volvo JV formed in 2008 0%
` New players such as Man, AMW, M&M-ITEC will FY03 FY04 FY05 FY06 FY07 FY08
also will start operations in the next few years TAMO Ashok Leyland Eicher Others
Source: SIAM, Cris Infac, ENAM Research
21
M&HCV Industry: Market structure
FY08
35.2T+ (M&HCV)
25-35.2T (M&HCV)
Tata Motors
64%
Eicher
Tata Motors
7.5T-12T (M&HCV) 75%
4%
12T-16.2T (M&HCV)
Passenger
Vehicles
7.5T-12T (M&HCV)
(Nos)
Ashok Eicher Swaraj Mazda Tatra Trucks India Tata Motors Volvo
Source: SIAM, ENAM Research
24
Cars: Competition gearing up
 Market share has diminished New products launches
TAMO over the last 12 months has lost market Segment Company Product Launch Date (expected)
A2 Segment Hyundai i-10 Launched Nov'07
share to new products launched by competitors Skoda Fabia Launched Jan'08
Indica: Value proposition at risk, on account of FIAT Grande Punto 2008 Expected
increased launches in the B Segment. MSIL A-Star Expected Oct-08
Honda Jazz 2009 Expected
Indigo: Increased number of diesel launches have MSIL Splash 2009 Expected
dented volumes A3 Segment MSIL SX4 Launched May'07
M&M - Renault Logan Launched April'07
 Aggressive competitive launches in A2 and FIAT Linea 2009 Expected
Ford Focus 2009 Expected
A3 segments
New Indica is the only launch expected from TAMO Market share loss in the last 12 months
- Lack of a wider portfolio
25,000 20
Shortening product life cycles and new products (No.s) (%)
augur for a larger product portfolio 20,000 18
15,000 16
 TATA-FIAT JV aimed at filling product gaps 10,000 14
50:50 JV with Fiat expanding production and
5,000 12
engine capacity at Ranjangaon
Expect 2-3 new models over the next 2 years 0 10
Nov-07
May-07
Dec-07
Jan-07
Jun-07
Jul-07
Aug-07
Jan-08
Feb-07
Mar-07
Apr-07
Oct-07
Feb-08
Mar-08
Sep-07
 TAMO might use cross learning from JLR
to launch a wide range of cars in the Volumes (LHS) Mkt Share (RHS)
future
Source: Company,ENAM Research
Monthly Vol
running behind schedule 25,000 27,000 28,500 30,000 31,500 33,000 34,500
(Nos)
30,000 32,400 34,200 36,000 37,800 39,600 41,400
 Possible demand robust, profitability 35,000 37,800 39,900 42,000 44,100 46,200 48,300
40,000 43,200 45,600 48,000 50,400 52,800 55,200
unsure
At ~USD 4,000 the addressable market for the
Nano within India and the export market could be EBITDA (Rs mn) EBIDTA Margin
100,000 3% 4% 5% 6% 8% 10%
very large
25,000 900 1,200 1,500 1,800 2,400 3,000
However, profitability with escalating costs remains
Monthly Vol
30,000 1,080 1,440 1,800 2,160 2,880 3,600
(Nos)
uncertain 35,000 1,260 1,680 2,100 2,520 3,360 4,200
40,000 1,440 1,920 2,400 2,880 3,840 4,800
 Capacity constraint 50,000 1,800 2,400 3,000 3,600 4,800 6,000
The capacity in Singur is expected to be 250,000 in
phase I. We believe that it will take 2-3 years
before supply can match the expected demand.
At full capacity the Nano will not have a material
impact on the overall profits of the company
26
Passenger car industry
FY08
485
A6:Luxry (5001mm & above)
5,241
A5: Premium (4701-5000 mm)
M&M Ford
GM
40,935
10% 13%
6% HM
A4: Executive (4501-4700 mm)
7%
Tata Motors Honda
223,239
14% 18% Hyundai
A3: Mid-size (4001-4500 mm) Hyundai Motor
Maruti 15% 21%
Udyog
22%
853,397
A2: Compact (3401-4000mm)
Maruti
Tata Motors 59%
16%
69,553
27
LCVs
28
Is Ace losing steam?
 Tata Ace: History LCVs: Quarterly sales
50,000 100
Indigenously designed and developed with a project (No.s) (No.s)
cost Rs 2bn over a period of 5 years. 40,000 80
Initial capacity of 70,000 units. Plans to increase
30,000 60
capacity to 200,000 units by Q3FY08.
20,000 40
 Expanding portfolio 10,000 20
TAMO has launched a passenger variant of the Ace in
0 0
September – 07
Dec-04
Dec-05
Dec-06
Dec-07
Jun-04
Jun-05
Jun-06
Jun-07
Expected to launch a 1-ton payload Ace for the export
market by Q3FY09, and a CNG variant of current Ace.
Volumes (LHS) Market Share (RHS)
29
LCV Industry: Market structure
FY08
Force
Eicher Motors
12% 1% M&M
5T-7.5T 12%
Swaraj
Goods Mazda
Tata Motors
9% Force
Carrier 66%
Motors M&M
4% 30%
Upto 5T
31
Subsidiaries… strong traction
 HV transmission and HV axles – 85% ownership
Captive transmission and gearbox manufacturing facilities are the most profitable amongst all
subsidiaries.
Both are expanding capacities to service the growth in production. TAMO has sold 15% in both HVAL
and HVTL in FY08 to unlock shareholder value.
34
Financials
35
TAMO: Overall volume estimates
Volumes FY06 FY07 FY08 FY09E FY10E
M&HCV 136,851 185,175 179,400 188,842 199,411
% Growth 1.1% 35.3% -3.1% 5.3% 5.6%
LCV 108,084 149,258 173,434 195,662 221,155
% Growth 45.6% 38.1% 16.2% 12.8% 13.0%
Total CV 244,935 334,433 352,834 384,504 420,566
% Growth 16.9% 36.5% 5.5% 9.0% 9.4%
Cars 169,102 195,408 179,268 175,800 182,400
% Growth 10.6% 15.6% -8.3% -1.9% 3.8%
Nano - - - 60,000 300,000
% Growth - - - - 400.0%
MUV 39,781 49,526 50,299 52,346 57,684
% Growth 7.4% 24.5% 1.6% 4.1% 10.2%
Total Vehicles 453,818 579,367 582,401 672,651 960,650
% Growth 14% 28% 1% 15% 43%
Source: Company, ENAM Research
36
Company Financials: (Standalone)
Income statement Key ratios
Y/E March 2007 2008E 2009E 2010E Y/E March 2007 2008E 2009E 2010E
Net sales 274,443 287,308 305,947 336,867 Sales growth 32.9 4.7 6.5 10.1
Other operating income 0 0 0 0
Total income 274,443 287,308 305,947 336,867 OPM 11.4 10.1 8.9 9.2
Oper. profit growth 24.7 (7.8) (5.5) 13.4
Cost of goods sold 233,470 248,970 269,148 296,296 COGS / Net sales 85.1 86.7 88.0 88.0
Contribution (%) 0 0 0 0 Overheads/Net sales 3.5 3.3 3.1 2.9
Advt/Sales/Distrn O/H 9,608 9,426 9,488 9,612 Depreciation / G. block 6.7 4.1 4.1 4.2
Effective interest rate 9.0 7.0 7.0 7.0
Operating Profit 31,365 28,912 27,311 30,959
Other income 2,452 3,444 3,789 3,978 Net wkg.cap / Net sales 0.1 0.0 (0.0) (0.0)
Net sales / Gr block (x) 3.3 2.3 1.8 1.7
PBIDT 33,817 32,357 31,100 34,938
Depreciation 5,863 6,523 7,794 9,031 Incremental RoCE 23.1 (41.9) (12.9) 12.2
Interest 3,131 2,824 2,981 3,506 RoCE 28.9 22.4 18.1 17.8
Other pretax 0 0 0 0 Debt / equity (x) 0.6 0.5 0.5 0.5
Pre-tax profit 24,824 23,010 20,325 22,400 Effective tax rate 25.9 23.8 25.0 25.0
Tax provision 6,438 5,476 5,081 5,600 RoE 29.7 23.3 17.7 17.6
(-) Minority Interests 0 0 0 0 Payout ratio (Div/NP) 30.2 28.5 37.9 34.4
Associates 0 0 0 0
Adjusted PAT 18,385 17,534 15,243 16,800 EPS (Rs.) 45.1 41.2 35.8 39.4
E/o income / (Expense) 750 2,764 0 0 EPS Growth 18.8 (8.8) (13.1) 10.2
CEPS (Rs.) 62.9 62.4 59.8 67.0
Reported PAT 19,135 20,298 15,243 16,800 DPS (Rs.) 15.0 15.0 15.0 15.0
37
Company Financials: (Standalone)
Balance sheet Cash flow
Y/E March 2007 2008E 2009E 2010E Y/E March 2007 2008E 2009E 2010E
Total assets 116,556 130,541 144,427 164,900 Sources 30,110 19,152 21,680 29,526
Gross block 87,758 158,191 188,191 213,191 Cash profit 25,891 24,518 23,444 26,279
Net fixed assets 38,813 102,723 124,929 140,898 (-) Dividends 6,763 6,763 6,763 6,764
CWIP 25,133 3,000 3,000 3,000 Retained earnings 19,128 17,754 16,680 19,515
Investments 24,770 26,770 28,770 30,770 Issue of equity 1,062 10 0 11
Wkg. cap. (excl cash) 19,573 (14,781) (14,697) (10,935) Borrowings 10,723 0 5,000 10,000
Cash / Bank balance 8,268 12,829 2,425 1,167 Others (803) 1,388 0 0
Others/Def tax assets 0 0 0 0
Applications 30,110 19,152 21,680 29,526
Capital employed 116,556 130,541 144,427 164,900 Capital expenditure 24,596 48,300 30,000 25,000
Equity capital 3,854 3,854 3,854 3,854 Investments 4,619 2,000 2,000 2,000
Reserves 64,743 78,267 86,747 96,772 Net current assets 5,308 (34,354) 84 3,762
Borrowings 40,091 40,091 45,091 55,091 Change in cash (4,413) 3,206 (10,404) (1,235)
Others 7,868 8,328 8,735 9,183
38
Subsidiaries: Financials and Valuations
Quarted Ended Year Ended
(Rs.mn) Q2FY07 Q3FY07 Q4FY07 Q1FY08 Q2FY08 Q3FY08 Q4FY08 FY06 FY07 FY08 FY09E
TDCV
Sales 5,655 5,896 7,118 7,360 6,640 9,705 7,047 15,849 23,336 30,752 36,902
PAT 240 225 161 310 410 669 196 583 830 1,585 1,661
TELCON
Sales 3,522 4,863 6,191 4,780 6,940 7,020 8,440 12,895 18,277 27,180 36,283
PAT 371 493 664 660 810 932 835 868 1,839 3,236 3,901
Tata Technologies
Sales 2,425 2,469 2,441 2,660 2,620 2,411 3,311 5,450 9,605 11,003 13,203
PAT 31 34 88 30 80 68 122 116 163 300 442
HV Transmission
Sales 405 472 505 390 430 514 589 1,276 1,756 1,923 2,154
PAT 96 133 123 70 100 131 174 301 450 474 520
HV Axle
Sales 443 530 570 400 440 541 652 1,439 1,967 2,032 2,236
PAT 125 180 131 100 120 136 278 463 579 634 641
Valuations
Subsidiaries TAMO Net Profit ROCE (%) RoE (%) P/E Valuation share per
holding FY08E FY09E FY07 FY07 (X) (Rs mn) of TAMO share
Tata Daewoo 100% 1,585 1,661 54.6% 10.1% 12.0 19,927 19,927 46.8
HV Axles 85% 634 641 45.7% 32.4% 10.0 6,405 5,445 12.8
HV Transmission 85% 475 520 49.2% 38.3% 10.0 5,195 4,416 10.4
Telcon 60% 3,235 3,901 67.5% 44.7% 15.0 58,510 35,106 82.4
Tata Technologies 85% 300 442 10.5% 6.5% 12.0 5,308 4,499 10.6
TACO 50% N.A. N.A. N.A. N.A. 0.75* 33,912 16,922 39.7
Total non-core 86,315 203
Source: Company, ENAM Research
39
Company Financials: (Consolidated)
Income statement Key ratios
Y/E March 2007 2008 2009E 2010E Y/E March 2007 2008 2009E 2010E
Net sales 320,996 356,515 395,720 439,359 Sales growth 38.3 11.1 11.0 11.0
Other operating income 0 0 0 0
Total income 320,996 356,515 395,720 439,359 OPM 11.5 11.8 10.0 10.3
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Company Financials: (Consolidated)
Balance sheet Cash flow
Y/E March 2007 2008 2009E 2010E Y/E March 2007 2008 2009E 2010E
Total assets 163,530 184,625 207,791 232,701 Sources 63,925 27,593 32,492 35,796
Gross block 108,022 162,838 195,838 222,838 Cash profit 30,019 29,824 29,610 33,807
Net fixed assets 53,755 103,572 125,572 140,572 (-) Dividends 6,836 8,059 9,067 11,082
CWIP 25,817 5,000 5,000 5,000 Retained earnings 23,183 21,765 20,543 22,725
Investments 11,746 12,746 13,746 14,746 Issue of equity 1,121 177 232 281
Wkg. cap. (excl cash) 58,048 50,183 59,458 68,092 Borrowings 39,228 5,000 11,000 12,000
Cash / Bank balance 11,543 10,502 1,394 1,670 Others 394 652 717 789
Others/Def tax assets 2,622 2,622 2,622 2,622
Applications 63,925 27,593 32,492 35,796
Capital employed 163,530 184,625 207,791 232,701 Capital expenditure 27,977 36,821 31,326 25,886
Equity capital 3,854 3,854 3,854 3,854 Investments (869) 1,000 1,000 1,000
Reserves 75,862 90,925 102,140 113,981 Net current assets 39,395 (7,864) 9,274 8,634
Borrowings 73,019 78,019 89,019 101,019 Change in cash (2,577) (2,363) (9,108) 276
Others 10,795 11,827 12,778 13,848
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TAMO: Valuation comparison
Company Period Net Sales EBITDA Adj. PAT FDEPS Core EPS Cash per Value of RoCE RoE Core P/E
(Rs mn) (Rs.mn) (Rs.mn) (Rs.) (Rs.) share (Rs.) Invst. (Rs.) (%) (%) (x)
For : Earnings and EPS are adjusted for other income. The cash per share reflects the surplus cash on balance sheet. Valuation ratios have been adjusted accordingly
Source: ENAM Research
Note: TAMO does not include JLR. Refer pg1 for conso + JLR estimates
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Global Valuations
Com pany (USD m n) Period Net EBITDA Adj. PAT PAT EBITDA Rep. FDEPS ROCE ROE PE EV/ Mkt Cap/ BVPS P/ B
Sales Margins Margins EPS grow th (%) (%) (X) EBITDA (X) Sales (X) (Rs) (x)
(%) (%) (Rs) (%)
Suzuki Motor Corp FY07 27,052 2,418 641 2.4 8.9 1.4 30.5 8.4 11.0 - - - 14.0 -
(CMP: 26) FY08 30,631 2,720 702 2.3 8.9 1.6 7.4 n.a 10.6 16.9 4.5 0.5 17.3 1.5
(MCap: USD.14bn) FY09E 34,249 3,008 762 2.2 8.8 1.6 4.8 n.a 9.3 16.1 5.1 0.4 18.0 1.5
FY10E 36,259 3,251 822 2.3 9.0 1.7 6.5 n.a 9.0 15.1 4.7 0.4 19.4 1.4
Hyundai Heavy Industries CY06 13,147 1,317 746 5.7 10.0 11.6 317.1 33.7 17.3 - - - 63.4 -
(CMP: 375) CY07 16,715 2,306 1,868 11.2 13.8 29.9 158.3 n.a 34.8 12.6 11.2 1.7 94.3 4.0
(MCap: USD.29bn) CY08E 17,955 2,855 2,190 12.2 15.9 30.4 1.7 n.a 35.3 12.3 8.9 1.6 96.7 3.9
CY09E 20,976 3,475 2,771 13.2 16.6 38.4 26.2 n.a 34.2 9.8 7.3 1.4 128.1 2.9
Daim ler Ag-Registered SharCY06 124,490 21,916 4,697 3.8 17.6 4.6 31.9 3.4 10.2 - - - 47.4 -
(CMP: 73) CY07 136,004 21,620 5,444 4.0 15.9 5.2 14.1 n.a 10.8 14.0 7.5 0.5 52.8 1.4
(MCap: USD.71bn) CY08E 159,445 21,409 9,184 5.8 13.4 9.3 76.6 n.a 15.4 7.9 6.6 0.4 62.0 1.2
CY09E 165,611 23,133 10,123 6.1 14.0 10.6 14.0 n.a 16.0 6.9 6.1 0.4 69.0 1.1
Fiat Spa CY06 65,031 6,173 1,336 2.1 9.5 1.1 (32.4) 8.7 11.8 - - - 9.7 -
(CMP: 21) CY07 80,083 8,170 2,672 3.3 10.2 2.1 101.4 n.a 19.6 9.9 6.1 0.3 12.3 1.7
(MCap: USD.26bn) CY08E 94,843 10,003 3,693 3.9 10.5 2.9 35.6 n.a 19.4 7.3 4.7 0.3 15.4 1.4
CY09E 100,309 11,171 4,206 4.2 11.1 3.3 13.8 n.a 19.5 6.4 4.2 0.3 17.9 1.2
General Motors Corp CY06 205,601 5,062 (1,978) (1.0) 2.5 (3.5) (81.0) n.a n.a - - - (10.0) -
(CMP: 17) CY07 181,122 5,123 (38,732) (21.4) 2.8 (68.5) 1,855.7 n.a n.a (0.2) 6.4 0.1 (65.5) (0.3)
(MCap: USD.10bn) CY08E 176,936 8,253 (3,277) (1.9) 4.7 (4.6) (93.2) n.a 4.6 (3.7) 3.8 0.1 (57.1) (0.3)
CY09E 184,460 10,369 290 0.2 5.6 (0.7) (84.3) n.a 3.1 (23.5) 3.0 0.1 (54.9) (0.3)
Ford Motor Co CY06 160,065 541 (12,613) (7.9) 0.3 (6.7) (961.5) n.a n.a - - - (2.6) -
(CMP: 6) CY07 172,455 13,092 (2,723) (1.6) 7.6 (1.4) (79.5) n.a n.a (4.7) 10.2 0.1 1.6 3.9
(MCap: USD.14bn) CY08E 147,484 6,011 (1,497) (1.0) 4.1 (0.3) (77.7) n.a 169.7 (21.0) 22.6 0.1 1.4 4.8
CY09E 149,849 7,965 184 0.1 5.3 0.1 (135.7) n.a 6.7 58.7 17.1 0.1 2.9 2.2
Bayerische Motoren Werke CY06 48,999 11,070 2,868 5.9 22.6 4.4 31.4 6 15.9 - - - 29.2 -
(CMP: 57) CY07 56,018 12,397 3,126 5.6 22.1 4.8 8.9 n.a 15.3 11.9 5.3 0.7 33.2 1.7
(MCap: USD.37bn) CY08E 89,271 12,858 4,355 4.9 14.4 6.6 38.8 n.a 12.0 8.6 7.4 0.4 56.0 1.0
CY09E 92,384 13,791 4,696 5.1 14.9 7.3 9.7 n.a 12.4 7.8 6.9 0.4 60.9 0.9
Toyota Motor Corp FY07 204,773 30,964 14,058 6.9 15.1 4.4 17.5 7 14.7 - - - 31.5 -
(CMP: 53) FY08 229,919 32,897 15,024 6.5 14.3 4.7 8.0 n.a 14.5 11.2 8.0 0.8 37.7 1.4
(MCap: USD.183bn) FY09E 243,894 30,263 13,847 5.7 12.4 4.3 (8.2) n.a 11.3 12.2 9.5 0.7 38.9 1.4
FY10E 253,725 32,520 15,226 6.0 12.8 4.7 9.2 n.a 11.8 11.2 8.9 0.7 41.7 1.3
43
ENAM Securities Pvt. Ltd.
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CONFLICT OF INTEREST DISCLOSURE
We, at ENAM, are committed to providing the most honest and transparent advice to our clients. However, given the nature of the capital markets, from time to time we are faced with situations that could give rise to
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Disclosure of interest statement (As of June 3, 2008)
1. Analyst ownership of the stock No
2. Firm ownership of the stock No
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4. Investment Banking mandate No
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We are committed to providing completely independent and transparent recommendations to help our clients reach a better decision.
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