Share Market Update on Tata Motors for 4QFY2011

Consolidated results driven by volume growth and higher average realisation:
On a consolidated basis, Tata Motors (TML) reported ~22.8% yoy top-line growth, aided by a ~13% yoy jump in volumes. Operating margin stood at 10.8% in 4QFY2011 vs. 10.9% in 4QFY2010. Reported profit stood at `1,842cr in 4QFY2011 compared to `2,248cr in 4QFY2010.

Standalone results driven by volume growth and higher average realisation:
On a standalone basis, TML reported ~19% yoy top-line growth, aided by ~13% yoy volume growth. Operating margin stood at 8.5% vs. loss in 4QFY2010. Reported profit came in at `573cr against loss of `856cr in 4QFY2010.

Outlook and valuation: We estimate TML to record a 7% CAGR in net profit over FY2011–13E on a consolidated basis, owing to the better-than-expected recovery in JLR. At 1,089, on a consolidated basis, the stock is trading at 7.1x and 6.5x FY2012E and FY2013E earnings, respectively. Valuing the company on an SOTP basis, we maintain our Buy rating with a target price of `1,456.

Share Market Update on Britannia for 4QFY2011

Britannia reported a strong set of numbers for 4QFY2011, above our estimates. Top-line growth stood at 21.1% yoy, driven by volumes, price hikes and improved product mix. The company reported strong earnings unlike loss reported during 4QFY2010. Operating margin expanded because of efficient cost management and gross margin expansion. We maintain Buy on the stock.

Steady top-line growth and impressive show on the margin front: Britannia registered robust top-line growth of 21.1% yoy, driven by 15% volume growth. The company has shown impressive top-line growth, which was a result of new product launches, price hike and improved product mix. For consecutive five quarters, Britannia has been posting 20% plus top-line growth. On the margin front, Britannia showed a stunning performance by managing raw-material costs as well as operating costs efficiently. As a result, the company reported gross margin expansion. OPM expanded after five quarters of contraction to 6.5%.

Outlook and valuation: During FY2011–13E, we expect Britannia to report a CAGR of ~17% in its top line (largely volume growth) and model in margin expansion of 180bp, despite sustained higher ad spends, aided by a benign input cost environment and higher operating leverage. Moreover, in terms of earnings, we expect Britannia to register a robust ~36% CAGR. Hence, we maintain our Buy rating on the stock with a revised target price of `495 (`458) based on 22x FY2013E EPS, in line with its historical valuations.
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