ttmtav230212

8/2/2019 TTMTAV230212

1/24

Pleaserefertothedisclaimertowardstheendofthedocument.

IndiaEquityResearch

Automobiles

February23,2012

A D D TataMotorsTargetPrice(INR) 303 RobustgrowthinJLRdrivenbyemergingmarkets

INITIATINGCOVERAGE JLR is likelyto 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.

Growthindevelopingcountries,launchesextendgoodtimesforJLR

Jaguar Land Rover (JLR) is witnessing robust sales volume growth due to the

growingacceptanceof itsvehicles indevelopingcountriessuchChina,Russia,

BrazilandIndia.Inaddition,successofproductssuchasEvoqueislikelytoaid

salesvolumegrowthforthecompany.WeestimateJLRssalesvolumestogrow

ataCAGRof15%overFY12fFY14f.

CargoSCVscontinuetodriveCVsalesvolumegrowth

WeestimatedomesticLCVstogrowataCAGRof20%overFY12fFY14f,ledby

robustgrowth

in

cargo

SCVs

(CAGR

of

22%).

Robust

demand

for

cargo

SCVs

is

ledbygrowth in lastmiletransportationandashift inpreference fromcargo

threewheelers toSCVs.Thissegmentcontributed76%ofdomesticLCVsales

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.

ForecastthreeyearCAGRof16%intotalincomeduetoJLR

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,

overFY12f

FY14f.

We

estimate

negative

financial

leverage

over

FY12f

FY14f

on

accountofhigherdepreciationandeffectivetaxrate.

InitiatewithanAddratingandaMar13pricetargetofINR303

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

investmentsat INR13/share.Our Mar13SOTPbased targetstandsat INR303,

whichprovidesanupsideof13%.We initiatecoverageonTTMTwithanAdd

rating.Riskfactorsarehighercommoditypricesandfuelprices.

LastPrice(INR)Bloomberg code

Reuterscode

Avg.Vol.(3m)(mn)

Avg.Val.(3m)(INRbn)

52wkH/L(INR)

Sensex

MCAP(INRbn/USDbn)

Shareholding(%) 9/11 12/11

Promoters

MFs,FIs,

Banks

FIIs

Public

Others

StockChart(RelativetoSensex)

StockPerfm.(%) 1m 3m 1yr

Absolute

Rel.toSensex

Financials(INRmn) 03/11 03/12f 03/13f

Sales

YoY(%)

EBITDA(%)

A.PAT

Sho/s(diluted)

A.EPS(INR)

YoY(%)

D/E(x)

P/E(x)

EV/E(x)

RoCE(%)

RoE(%)

QuarterlyTrends 03/11 06/11 09/11 12/11

Sales(INRbn)

PAT(INRbn) 25

356

9.9

6.1

22

66

21

336

TTMTIN

TAMO.BO

17.9

293/138

3.79

33

14.4

90,426

1.2

3,339

27.1

149

9

14.1

107,407

29

14.5

113,968

0.5

19

0.8

19

8.3

34

362

4.34.8

21

46

22.5

14.1

55.7

42.7 18.9

36

3,339

32.2

23

453

3,339

24.8

8.1

16.8

34.1

6

7.9

19.3

31.1 31.1

18,145

722.55/14.68

1,231,333

20.1

18.1

22.7

8.2

17.9

1,741,9121,594,303

269

100

150

200

250

300

Feb11 Jun11 Oct11 Feb12

Tata Motors Sensex Rebased

SriRaghunandhanNL,+9102266842863

[email protected]

8/2/2019 TTMTAV230212

2/24

India Equity Research TataMotors

Automobiles 2

TableofContents

Investmentsummary......................................................................................................................... 3Growthindevelopingcountries,launchesextendgoodtimesforJLR .................................................3CargoSCVscontinuetodriveCVsalesvolumegrowth.........................................................................3ForecastthreeyearCAGRof16%intotalincomeduetoJLR...............................................................3InitiatewithanAddratingandaMar13pricetargetofINR303...........................................................3

Growthindevelopingcountries,launchesextendgoodtimesforJLR.............................................. 5Stronggrowthduetorisingsalesindevelopingcountries.................................................................5andproductlaunches .........................................................................................................................6IndianpassengervehiclebusinesslikelytorecoverfromFY13f ...........................................................6

CargoSCVscontinuetodriveCVgrowth........................................................................................... 8RobustgrowthofcargoSCVsinthedomesticmarket .......................................................................8andinexportmarkets.........................................................................................................................9MHCVgrowthlikelytorecoverfromFY13f...........................................................................................9

ForecastthreeyearCAGRof16%intotalincomeduetoJLR ......................................................... 11StandalonesalesvolumegrowthledbyLCVs .....................................................................................11RisingcontributionofJLRinconsolidatedtotalincome .....................................................................11NegativefinancialleverageoverFY12fFY14f .....................................................................................12Freecashflowandlowernetdebt/equitydespitehugecapex ..........................................................12

InitiatewithanAddratingandaMar13pricetargetofINR303 ..................................................... 14Loweringcapitalizationratetoarriveatadj.EBITDAforJLR ..............................................................14SOTPbasedtargetofINR303;initiatecoveragewithAddrating .......................................................14Riskfactors ..........................................................................................................................................17

Financialsandvaluations(consolidated)......................................................................................... 18Annexure:PVsalesvolumes,growthandtopplayers..................................................................... 21

8/2/2019 TTMTAV230212

3/24


Automobiles 3

Investmentsummary

JLRiswitnessingrobustsalesvolumegrowthonaccountofgrowingacceptanceofitsvehiclesindevelopingcountries.

Despiteaslowdown

in

developed

countries,

JLRs

sales

volumes

are

likely

to

grow

at

aCAGR

of

15%

over

FY12f

FY14f.

Inaddition,successful launchessuchasEvoqueare likelytocontributetogrowth.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 taxrate.We havevalued thestandalonebusiness at9.0xEV/EBITDA,basedon themean

valuations of the previous cycle. We have valued JLR at 2.7x EV/EBITDA, based on threeyear (20092011) mean

valuationsofAudiAG(NSUGR,NR).OurMar13SOTPbasedtargetstandsatINR303,whichprovidesanupsideof13%.

Weinitiate

coverage

on

TTMT

with

an

Add

rating.

Risk

factors

are

higher

commodity

prices

and

fuel

prices.


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 tosales volumes to increase from 33.3% in FY11 to 50.4% inFY14f. Inaddition, 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.

Cargo

SCVs

continue

to

drive

CV

sales

volume

growth

Lightcommercialvehicles(LCVs)havebeendrivinggrowth incommercialvehicle (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

transportationandashift inpreferencefromcargothreewheelerstoSCVsforfreightoperators.We

alsoestimateTTMTtoreplicatethisgrowthinexportmarketsonaccountofgrowingacceptanceofits

cargoSCVsindevelopingcountries.Meanwhile,weestimatedomesticmediumandheavycommercial

vehicle (MHCV) sales volume growth to recover to 10% by FY13f after moderation to singledigit

growthinFY12f,onaccountofapickupininvestmentactivityduetothelikelyreversalintheinterest

ratecycle.Therehasalsobeenarevival insalesvolumegrowth(TTM)forLCVs;this isusuallya lead

indicatorofarevivalinMHCVsalesvolumegrowth.

Forecastthree

year

CAGR

of

16%

in

total

income

due

to

JLR

ConsolidatedtotalincomeislikelytogrowataCAGRof16%overFY12fFY14f,ledbyJLRsincreasing

contribution.JLRscontributiontototalincomeislikelytoincreasefrom57%inFY11to63%inFY14f.

WeestimateJLRandthestandalonebusinesstoreportaCAGRof19%and11%,respectively,intotal

income overFY12fFY14f.WeestimateconsolidatedEBITDA and PATto growataCAGRof16%and

12%, respectively, over FY12fFY14f. We estimate deterioration in consolidated PAT margins over

FY12fFY14f, implying negative financial leverageonaccount of higherdepreciationandeffectivetax

rate.Meanwhile,TTMTsconsolidatednetdebt/equity is likelytodeclinefrom1.2x inFY11to0.3xin

FY14fonthebackofpositivefreecashflows.


WehaveusedtheEV/EBITDAapproachtoarriveatafairvalueofINR113/shareandINR177/sharefor

thestandaloneandJLRbusinesses,respectively.WehaveadjustedJLRsEBITDAsothat itreflectsan

Weestimatethe

contributionofdeveloping

countriestosalesvolumes

toincreasefrom33.3%in

FY11to50.4%inFY14f.

DomesticcargoSCVsto

growataCAGRof22%

overFY12fFY14f.

JLRscontributiontototal

incomeislikelyto

increasefrom57%inFY11

to63%inFY14f.

Initiatecoveragewithan

Addrating

with

a

Mar13

TPofINR303.

8/2/2019 TTMTAV230212

4/24


Automobiles 4

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

0

10

20

30

Apr07 Feb08 Dec08 Oct09 Sep10 Jul11 May12 Mar13

1yrFwdEV/EBITDA Ta rgetEV/EBITDA Ave ra geEV/EBITDA

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

8/2/2019 TTMTAV230212

5/24


Automobiles 5


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

Global luxuryvehiclesalesvolumesandvaluestoodat5.5mnandcUSD300bn,respectively, in 2010.

WehavearrivedatthesevaluesbyaggregatingsalesoftheTop10 luxuryvehiclemanufacturers.JLR

contributesc4%andc5%ofgloballuxuryvehiclesalesvolumesandvalue,respectively.

WeestimateJLRssalesvolumestogrowataCAGRof15%overFY12fFY14fonaccountofthegrowing

contributionof

developing

countries

and

product

launches.

The

contribution

of

developing

countries

to

totalretailsalesvolumesislikelytoincreasefrom33.3%inFY11to50.4%inFY14fonaccountofrobust

salesvolumegrowthindevelopingcountries(CAGRof32%overFY12fFY14f).

Exhibit3:Retailsalesvolumebreakupacrossgeographies(%)Country/Region FY10 FY11 9MFY12

NorthAmerica 20.0 20.3 19.4

Europe,excludingRussiaandUK 24.3 22.3 22.0

UK 27.4 24.1 19.1

Russia 4.2 4.9 5.2

China 8.2 12.0 16.3

Others 15.9 16.4 18.0

Developedcountries 71.7 66.7 60.5

Developingcountries

28.3

33.3

39.5

Totalretailsalesvolumes(000s) 208.2 240.9 216.4

Totalincome(INRbn) 493.8 721.5 726.5

Source:Company

Faster growth in the population of high networth individuals (HNIs) in developing countries has

resultedinrobustdemandforluxuryvehicles.

Exhibit4:GrowthinHNIpopulation(%)2005 2010 CAGRover20052010

Developedregions/countries

NorthAmerica 2.85 3.44 4

Europe 2.80 3.12 2

Developingregions/countries

LatinAmerica 0.30 0.50 11

AsiaPacific 2.35 3.34 7

China 0.32 0.54 11

India 0.08 0.15 13

Brazil 0.11 0.16 7

Russia 0.10 0.13 5

Source:CapgeminiWorldWealthReport2005and2010

JLR is planning to set up nationalsales companiesandassembly/manufacturing plants in developing

countriestotakeadvantageoftherobustdemand inthesemarkets.Thesestepsare likelytofurther

reducethedependenceondevelopedcountries.

Weestimatesales

volumesindeveloping

countriestogrowata

CAGRof32%overFY12f

FY14f.

8/2/2019 TTMTAV230212

6/24


Automobiles 6

andproductlaunches

JLRs latest product offering, Evoque, has received strong order bookings across the world. We

estimateEvoquetocontributemorethan35%ofJLRssalesvolumesbyFY14f.The launchofEvoque

hasfurther

strengthened

the

lower

end

of

JLRs

product

portfolio.

JLRisplanningtospendGBP0.5bneveryyearoverthenextfewyearsonnewproductdevelopment.

Exhibit5:ScheduleforproductlaunchesModel Remarks

2012 XFestateandfacelift

2012 XEsportscar IncompetitiontoPorscheBoxster

2013 XJfacelift

2013 NewXK

2014 Compactsaloon IncompetitiontoBMW3series

2014 Crossover

2015 NewXF IncompetitiontoBMW5series

2017 XJCoupe

2018 ThirdgenerationalloyXJ

2020 SecondgenerationXE

2023 ThirdgenerationXK

Source:Company

Exhibit6:WorldwideproductportfolioBrand Models PriceRange(GBP)*

Jaguar XF 28,22847,555

XJ 48,68682,490

XK 57,07197,000

LandRover Defender 20,18531,660

Freelander2 20,81333,959

Evoque 27,95444,315

Discovery4 36,50949,181

RangeRoverSport 45,43969,447

RangeRover 65,36681,228

Source:Company Note:*OnroadpricesinUK

IndianpassengervehiclebusinesslikelytorecoverfromFY13f

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 42.1

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

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 55.6

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

Source:SIAM

WeestimateEvoqueto

contributemorethan

c35%of

JLRs

sales

volumesbyFY14f.

TTMTsdomesticPVsales

volumesarelikelyto

witnessafallof1%in

FY12f.

8/2/2019 TTMTAV230212

7/24


Automobiles 7

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


Source:SIAM

WehaveanalyzedthecompetitionintensityusingtheHerfindahlIndex.Thisindexshowsanincreasein

competition,especiallyoverthepastthreeyears,aftertheentryofnewplayers.

Exhibit10:HerfindahlIndexFY06 FY07 FY08 FY09 FY10 FY11 FY12ytd

Passengercars 33 33 32 33 32 29 24

Utilityvehicles 27 26 27 29 37 34 36

Multipurposevehicles 100 100 80 61 56 62 47

Source:SIAM,AvendusResearch Note:Lowerindexvalueindicateshighercompetition.

AnotherimpactofhighercompetitionistheincreasingsalespromotionexpenditureforTTMT.

Exhibit11:Salespromotionexpenditureasapercentageoftotalincome(%)FY06 FY07 FY08 FY09 FY10 FY11

Salespromotionexpenditureasa%oftotalincome 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 ratesarealso

likelytoimpactsalesvolumesinFY12f. Commodityinflationhasresultedinac5%hikeinvehicleprices

overthepast12months.Growinginterestrateshavealsonegativelyimpactedsalesvolumesas60%

65% of vehicles are financed (Source: Mahindra & Mahindra). As per our analysis, the inverse

correlationbetweenPVsalesvolumesandinterestratesstandsatc55%.

Exhibit12:TrendinmonthlypassengervehiclegrowthandSBINsprimelendingrate

20

0

20

40

60

Jan07 Jan08 Jan09 Jan10 Jan11 Jan12

8

10

12

14

16

GrowthinPVsales volumes(%) SBINprimelendingrate(%)(RHS)

Source:StateBankofIndia,SIAM,AvendusResearch Note:StateBankofIndia(SBININ,Buy)

WeestimateTTMTsPVsalesvolumegrowthtoimproveto10%byFY13fonaccountoflaunchesand

thelikelyreversalintheinterestratecycle.WeestimateTTMTsdomesticPVsalesvolumestogrowat

aCAGRof6%overFY12fFY14f.

HerfindahlIndexindicates

anincreaseincompetition

intensity.

Asperouranalysis,the

inversecorrelation

betweenPVsalesvolumes

andinterestratesstands

atc55%.

WeestimateTTMTsPV

salesvolumegrowthto

improveto10%byFY13f.

8/2/2019 TTMTAV230212

8/24


Automobiles 8

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

last

mile

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%initscargoSCV lessthan3.5tonnegrossvehicleweight(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 FY12ytd

TataMotors 59.4 68.6 64.8 60.5 57.2 56.0 57.5


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 1.7

AshokLeyland 1.3

HindustanMotors 0.0 0.1 0.0 0.0 0.1 0.1 0.0

Source:SIAM

TTMTisthemarketleaderinthedomesticcargoSCVsegmentwith57.5%marketshareinFY12year

todate.Inanefforttoretainthismarketshare,thecompanyhaslaunchedcargoSCVsoflessthan1.5

tonneGVW inMay11.ThetilttowardscargoSCVsmay increasefurtherdueto introductionofthese

vehicles.These1.5tonneGVWcargovehiclesarefasterandhavemarginallyhigherloadingcapacities

thanexistingcargothreewheelers.Asperouranalysis,profitabilityisalsohigherforthesevehicles.

Exhibit14:AnnualincomestatementforanSCVandacargothreewheelerforafreightoperator(INR) SCV TataAceZip(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

EBITDA 88,063 49,051

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(%) 4.5% 2.3%

RoE(%) 15.1% 7.9%

Onroadprice(Mumbai) 234,000 185,000

Source:AvendusResearch Note:Basedonsamplesurveyoffreightoperators

1.5tonneGVWcargoSCVs

havehigherprofitabilityin

comparisontothree

wheelers.

8/2/2019 TTMTAV230212

9/24


Automobiles 9

WeestimatedomesticLCVsalesvolumes togrow at aCAGRof20%overFY12fFY14f, ledbyrobust

growthincargoSCVs(CAGRof22%).ThecontributionofcargoSCVstodomesticLCVsalesvolumesis

likelytoincreasefrom75.7%inFY11to79.4%inFY14f.

Exhibit15:EstimateddomesticcargoSCVsalesvolumesandcontributiontoLCVvolumesFY06 FY07 FY08 FY09 FY10 FY11 FY12f FY13f FY14f

DomesticcargoSCVvolumes(000s) 48.0 90.6 101.8 89.2 121.4 152.2 197.9 231.5 273.2

CargoSCVsas%ofdomesticLCVvolumes(%) 55.7 72.0 75.9 74.2 72.5 75.7 77.2 78.0 79.4

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 exportvolumesofcargoSCVs togrowat aCAGR of 24%over FY12fFY14f,which ishigher

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:EstimatedexportvolumesofcargoSCVsandcontributionFY06 FY07 FY08 FY09 FY10 FY11 FY12f FY13f FY14f

ExportvolumesofcargoSCVs(000s) 13.0 14.0 14.5 7.7 10.8 24.9 32.4 38.8 46.6

CargoSCVsasa%ofexportvolumesofLCVs(%) 59.3 59.6 55.6 45.3 72.3 76.5 83.2 83.3 83.6


MHCVgrowth

likely

to

recover

from

FY13f

We estimate singledigit growth in domestic MHCV sales volumes in FY12f due to postponing of

purchasesbyfreightoperatorsonaccountof lowerroadfreightavailability. Inaddition,theexpiryof

the JawaharlalNehruNationalUrbanRenewalMissionscheme inDec11 isalso likely to impactsales

volumes.

Weestimate TTMTsgrowth torevive fromFY13fonaccountofapick up in investmentactivityand

freightavailabilityduetothelikelyreversal inthe interestratecycle.Therehasalsobeenarevivalin

salesvolumegrowth(TTM)forLCVs;thisisusuallyaleadindicatorofarevival inMHCVsalesvolume

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 isalso ramping updisbursements from its financing division Tata MotorsFinance toaid its

salesvolumegrowth.WeestimateTTMTsdomesticMHCVsalesvolumes togrowataCAGRof11%

overFY12fFY14f,marginallyhigherthantheindustryCAGRof10%.

Exhibit17:DomesticMHCVsalesvolumegrowthforTTMTandindustry(%)FY07 FY08 FY09 FY10 FY11 FY12f FY13f FY14f CAGR(FY07FY11) CAGR(FY12fFY14f)

TTMT 34.7 4.2 31.5 36.5 23.8 8.7 10.2 14.1 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


Weestimatedomestic

MHCVsalesvolume

growthtorecoverto10%

byFY13f.

8/2/2019 TTMTAV230212

10/24


Automobiles 10

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,AvendusResearch Note:*IncludestradedvehiclesofVolvoAB

DomesticCVsalesvolumesareestimatedtogrowataCAGRof16%overFY12fFY14f,ledbyaCAGRof

20%and11%inLCVsandMHCVs,respectively.

8/2/2019 TTMTAV230212

11/24


Automobiles 11

ForecastthreeyearCAGRof16%intotalincomeduetoJLR

ConsolidatedtotalincomeislikelytogrowataCAGRof16%overFY12fFY14f,ledbyJLRsincreasingcontribution.JLRs

contributionto

total

income

is

likely

to

increase

from

57%

in

FY11

to

63%

in

FY14f.

We

estimate

JLR

and

the

standalone

businesstoreportaCAGRof19%and11%,respectively, intotal incomeoverFY12fFY14f.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

Thestandalonebusinesshasbeenwitnessingrobustvolumegrowth inLCVs incomparisontoMHCVs

andPVs.Weestimatethistrendtocontinue,withaCAGRof20%,11%and6%indomesticLCV,MHCV

andPVsalesvolumes,respectively,overFY12fFY14f.Therobustexportvolumegrowth(CAGRof12%

over

FY12f

FY14f)

in

the

standalone

business

is

likely

to

continue

on

account

of

growing

acceptance

of

IndianCVs indevelopingcountries,despitepricehikes.Withdrawalofexport incentivessuchasDuty

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:EstimatedvolumesandtotalincomeFY11 FY12f FY13f FY14f CAGRoverFY12fFY14f(%)

Standalonebusiness

DomesticLCVvolumes(000s) 201,018 256,376 296,795 343,957 19.6

DomesticMHCVvolumes(000s) 192,127 208,799 230,180 262,634 11.0

DomesticPVvolumes(000s) 352,180 350,974 385,607 423,663 6.4

Exportvolumes(000s) 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

Source:SIAM,Company,AvendusResearch

RisingcontributionofJLRinconsolidatedtotalincome

JLRssalesvolumegrowthoverFY12fFY14fishigherthanthatofthestandalonebusiness.JLRssales

volumesarelikelytogrowataCAGRof15%onthebackoflaunchesandrobustgrowthindeveloping

countries.WeestimateconsolidatedtotalincometogrowataCAGRof16%overFY12fFY14f,mainly

ledbygrowthinJLR.

Exhibit20:Estimatedsalesvolumesandtotalincome

FY11 FY12f FY13f FY14f CAGRoverFY12fFY14f(%)

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.

WithdrawalofDEPB

benefitsunlikelytohavea

significantimpacton

exportvolumes.

8/2/2019 TTMTAV230212

12/24


Automobiles 12

NegativefinancialleverageoverFY12fFY14f

EBITDA margins are likely to broadly remain at similar levels over FY12FY14f. Although there is a

decline inEBITDA margins in thestandalonebusinessonaccountofhigher input costs, thisnegative

impacthas

been

fully

offset

by

higher

EBITDA

margins

in

JLR.

JLRs

contribution

to

EBITDA

is

likely

to

increasefrom69.1%inFY11to77.6%inFY12f.

Exhibit21:EstimatedEBITDAmargins(%)FY11 FY12f FY13f FY14f

Standalone 9.9 7.5 8.3 8.5

JaguarLandRover 16.3 17.9 18.2 18.2

Consolidated 14.4 14.1 14.5 14.5


We estimate negative financial leverage over FY12fFY14f. Consolidated PAT growth is likely to be

lowerthanEBITDAgrowthonaccountofhigherdepreciationandeffectivetaxrateinJLR.

Exhibit

22:Estimated

consolidated

total

income,

EBITDA

and

PAT

(INRmn) FY11 FY12f FY13f FY14f CAGRoverFY12fFY14f(%)

Totalincome 1,231,333 1,594,303 1,741,912 1,900,106 15.6

EBITDA 177,800 224,797 252,577 275,515 15.7

PAT 90,426 107,407 113,968 127,245 12.1


Thehigherdepreciation inJLRisonaccountofthehugecapex(GBP1.5bnperyear)plannedoverthe

next fewyears.Theeffectivetaxrate forJLR isestimated to increaseonaccountof incorporationof

national sales companies (NSCs). JLR has been setting up NSCs in several developing countries to

benefitfromrobustdemandinthesemarkets.AstheseNSCsareliabletopaytax,theoveralleffective

taxrateforJLRislikelytoincreasefrom7%inFY11to21%inFY14f.

Freecash

flow

and

lower

net

debt/equity

despite

huge

capex

The company is incurring huge capex (INR450bn) over FY12fFY14f. This capex is mainly in JLR on

accountoftheincreasedfocusonnewproductdevelopment.

Exhibit23:Estimatedfreecashflowandnetdebttoequity

0

20,000

40,000

60,000

80,000

FY11 FY12f FY13f FY14f

0.0

0.3

0.6

0.9

1.2

FCF(INRmn) Netdebttoequity(x) RHS


Negativefinancial

leverageoverFY12fFY14f.

8/2/2019 TTMTAV230212

13/24


Automobiles 13

Exhibit24:Trendinconsolidatedcapitalexpenditure(INRmn) FY06 FY07 FY08 FY09 FY10 FY11 F Y12f FY13f FY14f

Consolidatedcapitalexpenditure 12,592 27,588 52,804 99,708 81,240 84,754 156,881 157,960 142,014

Capexas

a%

of

net

fixed

assets

(%) 23 37 41 28 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.

8/2/2019 TTMTAV230212

14/24


Automobiles 14


WehaveusedtheEV/EBITDAapproachtoarriveatafairvalueofINR113/shareandINR177/shareforthestandalone

andJLR

businesses,

respectively.

We

have

adjusted

JLRs

EBITDA

so

that

it

reflects

an

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

previouscycle.WehavevaluedJLRat2.7xEV/EBITDA,basedonthreeyear(20092011)meanvaluationsofAudiAG.

Wehavevaluedothersubsidiariesand investmentsat INR13/share.OurMar13SOTPbased targetstandsat INR303,

whichprovidesanupsideof13%.WeinitiatecoveragewithanAddrating.Riskfactorsarehighercommoditypricesand

fuelprices.

Loweringcapitalizationratetoarriveatadj.EBITDAforJLR

TTMTcapitalizesmostof itsR&Dexpenditure inJLR(81.7%capitalized inFY11).As thecapitalization

rate for European peers is lower, we have lowered the capitalization rate for JLR to 50% in our

estimatestoarriveatadjustedEBITDAoverFY12fFY14f.

Exhibit25:R&DcapitalizationrateinEuropeancompanies(%)

R&DcapitalizationrateinFY11/2010

AudiAG 33.1

BMWAG 34.3

DaimlerAG 28.3


Exhibit26:EstimatedAdj.EBITDAinforJLR(INRmn) FY11 FY12f FY13f FY14f

EBITDA 117,903 186,009 204,915 218,775

Adj.EBITDA 102,862 152,212 170,847 185,828


WeusethisadjustedEBITDAinourEV/adj.EBITDAapproachforvaluingJLR.

SOTPbasedtargetofINR303;initiatecoveragewithAddrating

WevaluethestandalonebusinessofTTMTatanEV/EBITDAof9.0x,basedonmeanvaluationsover

thepreviousCVcycle.WeapplythismultipletoarriveatafairvalueofINR113/share.

Exhibit27:TTMTsstandaloneoneyearforwardrollingEV/EBITDAandEV/EBITDAattargetprice

0

7

14

21


1yrFwdEV/EBITDA Target1yrfwdEV/EBITDA

AverageEV/EBITDA


Thecapitalization

rate

for

peersisuptoc50%in

Europeancompanies.

8/2/2019 TTMTAV230212

15/24


Automobiles 15

The earnings growth over FY12fFY14f is lower than historical (FY08FY11) growth on account of

moderationindomesticMHCVandPVsalesvolumesinFY12f.Weestimatethistrendtoreverseover

FY13fFY14f;earningsgrowth islikelytoberobust(CAGRof26%)overFY13fFY14fonaccountofthe

likelyrecovery

in

domestic

MHCV

and

PV

sales

volume

growth.

Exhibit28:ComparisonofhistoricalandfuturegrowthofTTMTsstandalonebusiness(%) 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,AvendusResearch Note:*AvendusEPS

WehavevaluedtheJLRbusinessat2.7xEV/EBITDA,basedonthreeyear(20092011)meanvaluations

ofNSU.Applyingthismultiple,wearriveataMar13fairvalueofINR177/shareforJLR.

AlthoughJLRissmallerinsizeincomparisontoNSU,earningsgrowthissignificantlyhigheroverFY12f

FY14f.

Exhibit29:SizecomparisonbetweenJLRandNSU(FY11/2010) Salesvolumes Totalincome(INRmn)

JaguarLandRover 243,621 9,905

AudiAG(NSU)* 1,293,453 30,413

Source:Company,Bloomberg,AvendusResearch Note:*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,

Avendus

Research

Note:*JLR

numbers

converted

to

EUR

for

comparison

Exhibit31:NSU'soneyearforwardrollingEV/EBITDA

0

2

4

6

Jan09 Jun09 Nov09 Apr10 Sep10 Feb11 Jul11 Dec11

1yrFwdEV/EBITDA AverageEV/EBITDA


We have valued other subsidiaries and investments at INR13/share. Our Mar13 SOTPbased target

standsatINR303,whichprovidesanupsideof13%.WeinitiatecoverageonTTMTwithanAddrating.

AtourMar13TP,thestocktradesatanEV/EBITDAof4.2x

EarningsgrowthataCAGR

of26%overFY13fFY14f.

8/2/2019 TTMTAV230212

16/24


Automobiles 16

Exhibit32:SOTPvaluationStake

held

Basisof

valuation

Equityvalue

(INRmn)

Value/share

(INR)

Rationale

Standalone

9x

EV/EBITDA 378,052

113

Discount

to

previous

CV

cycle's

mean

EV/EBITDA

JaguarLandRover 100% 2.7xEV/EBITDA 590,617 177 BasedonNSU'sthreeyear(20092011)mean

EV/EBITDA

TataMotorFinance 100% 1xP/ABV 24,079 7 DiscounttoMahindra&MahindraFinancial

Services'(MMFSIN,Add)threeyearmean

P/ABV

TMLDrivelines 85% 9xP/E 20,895 6 DiscounttoAutomotiveAxles(ATXLIN,NR)

previousCVcycle'smeanP/E

Total 303

Source:AvendusResearch

Exhibit33:OneyearforwardrollingEV/EBITDAandEV/EBITDAattargetprice

0

10

20

30


1yr

Fwd

EV/EBITDA Ta rget

EV/EBITDA Ave ra ge

EV/EBITDA


Initiatecoveragewithan

AddratingwithaMar13

TPofINR303.

8/2/2019 TTMTAV230212

17/24


Automobiles 17

Riskfactors

Rise in raw material prices: We have assumed stable raw material cost per vehicle over FY12fFY14f. If the prices of steel, aluminum and rubber increase, then the companys margins and

demandare

likely

to

be

adversely

affected.

Rise infuelprices:An increase infuelprices is likelyto leadtopostponementofCVpurchasesbyfreightoperators,asitnegativelyimpactstheirmargins.

Exhibit34:Sensitivityanalysis Impactonearningsonaccountof1%declinein:(%) FY12f FY13f FY14f

Standalonesalesvolumes 0.4 0.4 0.5

Standaloneblendedrealizations 4.6 4.4 4.5

Standalonerawmaterialcostpervehicle 2.8 2.6 2.7

JLRsalesvolumes 1.1 1.0 0.9

JLRblendedrealizations 5.2 5.1 5.0

JLRrawmaterialcostpervehicle 4.5 3.9 3.8

Source:AvendusResearch

Exhibit35:RelativevaluationsasonFebruary22,2012CMP Rating TargetPrice Upside PriceChange(%) P/E EV/E ROCE(%) ROE(%)

(INR) (INR) (%) 1m 3m 6m 2012f/

FY12f

2013f/

FY13f

2014f/

FY14f

2012f/

FY12f

2013f/

FY13f

2014f/

FY14f

2012f/

FY12f

2012f/

FY12f

AL 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 45.6Source:Bloomberg,AvendusResearch Note:*YearendingDecember,ProportionateshareofEIMinVECVconsideredforratios

8/2/2019 TTMTAV230212

18/24


Automobiles 18

Financialsandvaluations(consolidated)

Incomestatement(INRmn)Fiscal

year

ending 03/10 03/11 03/12f 03/13f 03/14f

Grosssal es 949,416 1,267,125 1,641,541 1,793,524 1,956,405

Less:Excise duty 30,482 42,863 55,529 60,670 66,180

Netsal es 918,935 1,224,262 1,586,013 1,732,854 1,890,226

Other operatingincome 6,258 7,071 8,290 9,058 9,881

Totaloperatinginco me 925,193 1,231,333 1,594,303 1,741,912 1,900,106

Totaloperatingexpenses 839,051 1,053,533 1,369,506 1,489,335 1,624,591

Netmateri als 624,613 8 03,199 1,044,269 1,137,469 1,240,769

Other directcosts 41,257 4 7,761 6 3,241 6 8,708 7 4,948

Personnel 87,518 93,427 119,573 128,902 140,608

SG&A 81,366 102,505 132,621 144,248 158,342

R&D 4,297 6,641 9,803 10,009 9,924

EBITDA 86,142 177,800 224,797 252,577 275,515

Other income 17,931 896 1,767 967 967

Depreciat ion 43,853 56,180 68,679 80,585 90,585

EBIT 60,220 122,516 157,885 172,960 185,898

Interest 22,397 20,454 23,794 22,887 18,339

RecurringPB T 37,822 102,062 134,091 150,073 167,559

Netextraordinaryitems 2,596 2,310 5,273 2,111 2,216

PBT (reported) 35,226 104,372 128,818 152,184 169,775

Totaltaxes 10,058 12,164 27,052 36,524 40,746

PA T(repor ted) 25,169 92,208 101,766 115,660 129,029

Add:Shareo f earningsofassociat e 845 1,014 1,312 1,434 1,564

Less:Minorityi nterest 303 485 944 1,015 1,132

Priorperiod items 0 0 0 0 0

Netincome(reported) 25,711 92,736 102,134 116,079 129,461

Avendusneti ncome 28,307 90,426 107,407 113,968 127,245

Dividend +Distribution tax 10,019 14,813 14,910 17,233 21,905

Shares outstanding(mn) 2,532 3,189 3,189 3,294 3,294

Avendusdiluted

shares

(mn) 2,601 3,339 3,339 3,339 3,339

AvendusEPS (INR ) 10.9 27.1 32.2 34.1 38.1

Growthratios(%)Totaloperatingi ncome 30.4 33.1 29.5 9.3 9.1

EBITDA 292.0 106.4 26.4 12.4 9.1

EBIT NM 103.4 28.9 9.5 7.5

RecurringPB T NM 169.8 31.4 11.9 11.7

Avendusnet income NM 219.5 18.8 6.1 11.6

AvendusEPS NM 148.8 18.8 6.1 11.6

Operatingratios(%)EBITDAmargi n 9.3 14.4 14.1 14.5 14.5

EBIT m ar gin 6.5 9.9 9.9 9.9 9.8

Netprofitmargin 3.0 7.3 6.7 6.5 6.7

Other income/PBT 47.4 0.9 1.3 0.6 0.6

EffectiveTax

rate 28.6

11.7

21.0

24.0

24.0

8/2/2019 TTMTAV230212

19/24

8/2/2019 TTMTAV230212

20/24


Automobiles 20

KeyRatiosFiscalyearending 03/10 03/11 03/12f 03/13f 03/14f

Valuationratios(x)

P/E (on Avendus EPS) 24.7 9.9 8.3 7.9 7.0

P/E (on basic,reportedEPS) 26.4 9.2 8.4 7.6 6.8

P/CEPS 9.7 6.1 5.1 4.6 4.1

P/BV 8.3 4.5 3.1 2.2 1.8

Dividend yield(%) 1.3 1.5 1.5 1.7 2.1

Marketcap. /F CF 11.1 28.6 37.7 20.3 10.5

Marketcap. /S ales 0.7 0.7 0.5 0.5 0.5

EV/Sales 1.0 0.9 0.7 0.6 0.5

EV/EBITDA 11.0 6 .1 4.8 4.3 3.7

EV/F CF 15.4 36.0 47.8 24.7 12.1

EV/TotalAssets 2.1 2.0 1.7 1.5 1.4

NetCash/ Marketcap. 14.4 14.2 16.5 14.8 12.2

Pershareratios(INR)

AvendusEPS 10.9 27.1 32.2 34.1 38.1

EP S(Basic,r epor ted) 10.2 29.1 32.0 35.2 39.3

Cash EPS 27.7 43.9 52.7 58.3 65.2

Book Value 32.4 60.1 8 7.5 120.5 153.2

Dividend pershare 3.4 4.0 4.0 4.5 5.7

ROEDecomposition(%)

EBIT margin 6.5 9.9 9.9 9.9 9.8

Assetturnover(x) 2.1 2.5 2.7 2.5 2.6

Interestexpenserati o 5.2 4.2 4.0 3.3 2.5

Tax retentionratio 71.4 88.3 79.0 76.0 76.0

RO A 6.6 18.4 18.1 16.7 17.4

Totalassets/equity (x) 6.4 3.6 2.5 2.0 1.6

RO E 42.2 66.1 45.6 33.7 28.2

Returnratios (%)

EBIT /CapitalEmploy ed 14.0 24.9 26.6 25.3 25.4

ROCE

10.3 22.0 21.3 19.2 19.3RO IC 16.8 38.8 36.7 30.5 28.5

FC F/IC 23.3 10.7 6.6 10.1 17.0

OCF /S ales 10.7 10.9 11.3 11.6 11.9

FC F/Sal es 6.6 2.4 1.4 2.5 4.4

Turnoverratios (x)

Grossturnover 1.4 1 .7 1.8 1.7 1.6

Nettur nover 3.1 3.9 3.8 3.4 3.3

Revenue/IC 3.5 4.4 4.6 4.0 3.8

Inventory/Sales(day s) 43.9 37.6 36.7 41.1 42.3

Receivables(days) 23.6 20.9 18.0 20.2 21.0

Payab les(days) 164.2 1 57.2 1 42.0 1 55.4 1 58.1

Working capitalcycle(excash)(days) 22.8 22.1 16.4 16.4 16.7

Solvencyratios(x)

Grossdebttoequity 4.5 1.8 1.3 0.8 0.5

Netdebt

to

equit y 3.3 1.2 0.8 0.5 0.3

Netdebtto EBITDA 3.1 1.2 1.0 0.7 0.5

InterestCoverage (EBIT/Interest) 2.7 6.0 6.6 7.6 10.1

8/2/2019 TTMTAV230212

21/24


Automobiles 21

Annexure:PVsalesvolumes,growthandtopplayers

Passengercars FY07 FY08 FY09 FY10 FY11 CAGR%(FY07FY11)

Totalsales

volumes

(000s) 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

Exportsalesvolumes(000s) 192.7 211.1 331.5 441.7 447.4 12.2

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

Top3Players

Domesticsalesvolumes(000s)

MarutiSuzuki 549.3 618.2 636.7 765.5 966.4

HyundaiMotorIndia 194.9 216.3 244.0 315.0 358.9

TTMT 179.0 167.1 160.4 201.4 256.2Domesticsalesvolumegrowth(%)

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

Domesticmarketshare(%)

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

Utilityvehicles FY07 FY08 FY09 FY10 FY11 CAGR%(FY07FY11)

Totalsalesvolumes(000s) 224.6 251.6 228.8 275.6 328.0 7.2







Top3Players

Domestic

sales

volumes

(000s)Mahindra&Mahindra 89.7 103.9 106.5 150.6 170.2

ToyotaKirloskarMotor 43.6 48.2 38.3 53.7 64.9

TTMT 47.9 49.7 41.8 35.5 44.2

Domesticsalesvolumegrowth(%)

Mahindra&Mahindra 6.8 15.8 2.5 41.5 13.0 9.1

ToyotaKirloskarMotor 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


Mahindra&Mahindra 40.8 42.4 47.2 55.2 52.5

ToyotaKirloskarMotor 19.8 19.7 17.0 19.7 20.0

TTMT 21.7 20.3 18.5 13.0 13.6

8/2/2019 TTMTAV230212

22/24


Automobiles 22

Multipurposevehicles FY07 FY08 FY09 FY10 FY11 CAGR%(FY07FY11)

Totalsales

volumes

(000s) 84.4 101.9 107.8 151.9 215.8 15.0







Top3Players

Domesticsalesvolumes(000s)

MarutiSuzuki 83.1 89.7 77.9 101.3 160.6

TTMT 0.0 11.1 28.7 48.9 51.8


Domesticsalesvolumegrowth(%)

MarutiSuzuki 25.2 8.0 13.1 30.0 58.5 11.1

TTMT NM NM 157.4 70.7 5.8 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


8/2/2019 TTMTAV230212

23/24


Automobiles 23

AnalystCertification

Thefollowinganalyst(s) is(are)primarilyresponsible forthisreportand,certifies(y)thattheopinion(s)onthesubjectcompany(ies) and itssecurity(ies)andanyotherviewsor

forecastsexpressedhereinaccuratelyreflecttheirpersonalview(s).Theyfurthercertifythatnopartoftheircompensation was,isorwillbedirectlyorindirectlyrelatedtothe

specificrecommendation(s) orviewscontainedinthisresearchreport:SriRaghunandhanNL

Disclosures

MeaningofAvendusSecuritiesPrivateLimitedsequityresearchratings

Theratingrepresentstheexpectedchangeinthepriceofthestockoverahorizonof12months.

Buy:morethan+20% Add:+10%to+20% Hold: 10%to+10% Reduce: 10%to 20% Sell:lessthan 20%

Proportionofratingsineachcategoryandinvestmentbankingrelationships

AttheendofDecember2011 Buy Add Hold Reduce Sell NR Total

Proportionofratingsineachcategory 32% 24% 29% 7% 0% 7% 100%

Proportionofcompaniestowhommaterialinvestmentbankingserviceswereofferedduringtheprevious12months 0% 13% 5% 0% 0% 20% 6%

Analystdisclosures

None of theanalysts involved in thepreparation of this researchreportoramemberof his/herhousehold isan officer, director or supervisory board memberof any of the

company(ies)that

is/are

the

subject

of

this

research

report.

None

of

the

analysts

involved

in

the

preparation

of

this

research

report

or

members

of

his/her

household

hold

any

financialinterestinthesecuritiesofthecompany(ies) thatis/arethesubjectofthisresearchreport.Noneoftheanalystsinvolvedinthepreparationofthisresearchreporthave

receivedorpurchasedsharesofthesubjectcompanypriortothepublicofferingofthoseshares

DisclosuresonpotentialconflictsofinterestforAvendusSecuritiesPrivateLimitedand/oritsassociatecompanies(Avendus)asonFebruary21,2012

Asontheabovementioneddate,theshareholdings ofAvendusdoesnotexceed5%ofthetotal issuedsharecapitalofTataMotorsLimited(TTMT).Avendusdoesnotholdany

otherfinancialinterestinTTMTthatissignificantwithregardtotheresearchrecommendation. Asontheabovementioneddate,theshareholdings ofTTMTdoesnotexceed5%of

thetotalissuedsharecapitalofAvendus.Avendusisnotamarketmakerorliquidityproviderinthesecurities oftherelevantissuerorinanyrelatedderivatives.Avendushasnot

beenaleadmanagerorcoleadmanagerofapubliclydisclosedofferofsecuritiesofTTMTorinanyrelatedderivativesoverthepast12months.Overthepast12months,Avendus

hasnotbeenpartytoanagreementwithTTMTwithregardtotheprovisionofotherinvestmentbankingservicesthatdonotentailthedisclosure ofanyconfidential commercial

information. Avendusisnotpartytoanagreementwiththesubjectcompany(ies) ofthisresearchreportwithregardtotheproductionofthisresearchreport.

Sharepricehistoryandratingchanges

Add,23Feb12,303

130

190

250

310

Feb11 Apr11 Jun11 Jul11 Sep11 Nov11 Dec11 Feb12

TTMT(InitiatedonFeb23, 12) Rating,Date,TP(INR)

8/2/2019 TTMTAV230212

24/24


Automobiles 24

Disclaimer

ThisdocumenthasbeenpreparedbyAvendusSecuritiesPrivateLimited(ASPL).Thisdocumentismeantfortheuseoftheintendedrecipientonly.Thoughdisseminationtoall

intendedrecipientsissimultaneous, notallintendedrecipientsmayreceivethisdocumentatthesametime.Thisdocumentisneitheranoffernorsolicitationforanoffertobuy

and/orsellanysecuritiesmentionedhereinand/orofficialconfirmationofanytransaction. Thisdocumentisprovidedforassistanceonlyandisnotintendedtobe,andmustnot

betakenas,thesolebasisforaninvestmentdecision.Theuserassumestheentireriskofanyusemadeofthisinformation. Eachrecipientofthisdocumentshouldmakesuch

investigationashedeemsnecessarytoarriveatanindependentevaluation,includingthemeritsandrisksinvolved,forinvestmentinthesecuritiesreferredtointhisdocument

andshouldconsulthisownadvisorstodeterminethemeritsandrisksofsuchinvestment.Theinvestmentdiscussedorviewsexpressedmaynotbesuitableforallinvestors.This

documenthasbeenpreparedonthebasisofinformation obtainedfrompubliclyavailable,accessibleresources. ASPLhasnotindependently verifiedalltheinformationgivenin

thisdocument.Accordingly,norepresentationorwarranty,expressorimplied,ismadeastoaccuracy,completeness orfairnessoftheinformationandopinioncontainedinthis

document.The informationgiven inthisdocument isasofthedateofthisdocumentandtherecanbenoassurancethat futureresultsoreventswillbeconsistentwiththis

information. Though ASPL endeavors to update the information contained herein on reasonable basis, ASPL, its associate companies, their directors, employees, agents or

representatives(ASPLanditsaffiliates)areundernoobligationtoupdateorkeeptheinformationcurrent. Also,theremayberegulatory,compliance orotherreasonsthatmay

preventusfromdoingso.ASPLanditsaffiliatesexpresslydisclaimanyandallliabilitiesthatmayarisefrominformation, errororomissioninthisconnection. ASPLanditsaffiliates

shallnotbeliableforanydamageswhetherdirect,indirect,specialorconsequential, includinglostrevenueorlostprofits,whichmayarisefromorinconnection withtheuseof

thisdocument.Thisdocumentisstrictlyconfidential andisbeingfurnishedtoyousolelyforyourinformation. Thisdocumentand/oranyportionthereofmaynotbeduplicatedin

anyformand/orreproduced orredistributedwithoutthepriorwrittenconsentofASPL.Thisdocument isnotdirectedor intendedfordistribution to,oruseby,anypersonor

entity who is a citizen or resident of the United States or Canada or is located inany other locality, state, country or otherjurisdiction, where such distribution, publication,

availability or use would be contrary to law or regulation or whichwould subject ASPL and itsaffiliates toany registration or licensing requirements within suchjurisdiction.

Persons inwhosepossessionthisdocumentcomesshould informthemselvesaboutandobserveanysuchrestrictions.ASPLand itsaffiliatesmaybeperforming orseekingto

performinvestmentbankingandotherservicesforanycompanyreferredtointhisdocument.AffiliatesofASPLmayhaveissuedotherreportsthatareinconsistentwithandreach

adifferentconclusionfromtheinformationpresentedinthisdocument.

Thiscommunication isexemptfromthefinancialpromotionrestriction(inSection21oftheFinancialServicesAndMarketsAct,2000(FSMA))relatingtothecommunication ofan

invitation orinducementtoengageininvestmentactivityonthegroundsthatitismadetoaninvestmentprofessional.Anyinvestmenttowhichthiscommunicationrelatesisonly

availabletoinvestmentprofessionals. Anypersonswhodonothaveprofessional experienceinsuchinvestmentsshouldnotrelyonthiscommunication.

ASPLanditsaffiliatesmayhaveinterest/positions, financialorotherwise,inthecompaniesmentionedinthisdocument.Inordertoprovidecompletetransparency toourclients,

wehaveincorporateddisclosuresaboutinterestsofanalystsandaboutpotentialconflictsofinterestofASPLanditsassociatecompaniesinthisdocument.Thisshould,however,

notbe

treated

as

an

endorsement

of

the

view

expressed

in

the

document.

ASPL

is

committed

to

providing

high

quality,

objective

and

unbiased

research

to

our

investors.

To

this

end,wehavepolicies inplaceto identify,considerandmanagepotentialconflictsofinterestandprotecttheintegrityofourrelationshipswith investingandcorporateclients.

Employeecompliancewiththesepoliciesismandatory. AnycommentorstatementmadehereinaresolelythoseoftheanalystanddonotnecessarilyreflectthoseofASPL.

OUROFFICES

AvendusSecuritiesPrivateLimited

Mumbai: 6thFloor,BQuadrant,IL&FSFinancialCentre,BandraKurlaComplex,Bandra(E),Mumbai 400051 T:+912266480050 F:+912266842870

AvendusCapitalPrivateLimited

Mumbai: 5thFloor,BQuadrant,IL&FSFinancialCentre,BandraKurlaComplex,Bandra(E),Mumbai 400051 T:+912266480050 F:+912266480040Bangalore: TheMilleniaTower,A 10thFloor,No1&2MurphyRoad,Ulsoor,Bangalore 560008,India T:+918066483600 F:+918066483636NewDelhi: Suite22A/B,TheAmanResort,LodhiRoad,NewDelhi 110003,India T:+911145357500 F:+911145357540London: AvendusCapital(U.K.)PrivateLimited,33,StJames'sSquare,London,SW1Y4JS T:+442031594353 F:+442076619400

AvendusSecuritiesPrivateLimited SEBIRegistrationNo:BSECM INB011292639|NSECM INB231294639|NSEF&O INF231294639

ttmtav230212

Documents