S&P ups Tata Motors to 'BB';outlook positive. Tata Motors' dominant position in the growing Indian commercial vehicle market and JLR's improving competitive position support the company's business risk profile.
On Fri, Jul 6, 2012 at 1:31 PM, Puransingh Kochar <[email protected]>wrote: > Morgan Stanley on Friday cut its price target on Tata > Motors<http://www.moneycontrol.com/india/stockpricequote/auto-lcvshcvs/tata-motors/TM03>to > Rs 240 from Rs 291 saying there were multiple speed bumps ahead -- > Jaguar Land Rover's product cycle is entering a slow phase, India's medium > and heavy commercial vehicle cycle is weak and luxury vehicle environment > is becoming more competitive. > > Over the last couple of years, JLR has seen strong growth in emerging > markets. China, for instance, now contributes 35% of its EBITDA (earnings > before interest, taxes, depreciation and amortization) and is growing at > 70% year-on-year according to the global investment bank. But after setting > a scorching pace, things could be cooling down here. > > Morgan Stanley recently conducted its third China dealer survey and there > are signs of a slowdown. > > Incentives are rising in the Chinese luxury vehicle market and majority > (65%) of the dealers surveyed indicated that pricing environment has become > more competitive than it was a year ago. > > 55% of dealers reported that inventories are rising. Land Rover's > inventory has gone up to 30 days from 15 days. > > Showroom footfalls are also falling at premium brands. Like-for-like > growth for Land Rover is down to 8% in the first half of 2012 from 13% in > second half last year. > > Apart from slowing sales, Morgan Stanley points out that after the huge > success of the Evoque SUV last year, there is not much on the production > front that will surprise the street positively this year. > > "Over the next two quarters product cycle will be going into a lull prior > to upgrades to its Range Rover and Sport in early 2013...Evoque's > performance was a positive surprise to the Street, whereas this time > consensus is building in healthy growth from the Range Rover upgrades into > estimates, thus the likelihood of a positive surprise is limited," it said. > > Meanwhile, back home, the medium and heavy commercial vehicle sector has > hit a slowdown due to the overall macro-economic downturn and high interest > rates. According to Morgan Stanley estimates, M&HCV sales contribute to > 60% of Tata Motors' EBITDA, so a slowdown here is also a big concern. Tata > Motors' M&HCV sales fell 23% to 34,943 units in April-June. > > Tata Motors is down almost 26% from its 2012 high. But Morgan Stanley has > maintained a "equal-weight" rating on the stock. > > CLSA too had removed Tata Motors from its top five "buy" ideas this > week saying, sentiment has deteriorated over the last few months with > disappointments on JLR margins and non-Evoque volumes. While valuations > remain attractive, it doesn't forsee any near-term triggers. > -- CA. Rajesh Desai -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en.
