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Friday, January 04, 2008

Tata Motors, Cement Sector


Tata Motors
Cluster: Apple Green
Recommendation: Hold
Price target: Rs792
Current market price: Rs790

December sales decline by 2%

Key points

  • Tata Motors' sales for December 2007 stood at 47,678 vehicles. Total sales declined by 2.2% year on year (yoy) and grew by 1.6% month on month (mom).
  • Commercial vehicle (CV) sales in the domestic market for the month grew by 6.6% to 28,661 vehicles. Light commercial vehicle (LCV) segment continued to exhibit strong growth of 19% yoy. Medium and heavy commercial vehicle (M&HCV) sales declined by 9.2% to 15,689 vehicles. However on a month-on-month (m-o-m) basis M&HCV sales grew by 8.8%.
  • Passenger vehicle segment continued its weak performance and losing its market share, as no new products were launched. Further, being the last month of the year, off take to dealers was curtailed to limit year-end stock. The domestic sales declined by 12.3% to 14,316 vehicles. Passenger car sales for the month declined by 14.1%. Indica sales declined by 10% yoy to 9,497 units, while Indigo sales fell by a whopping 33.6% yoy to 1,379 vehicles. Sales of Utility vehicles declined by 10.6% yoy to 3,440 units. However, sales of Safari recorded a growth of 10% to 1,161 units mainly due to recent launch of Safari Dicor VTT.
  • Export sales for the month grew by 15.7% yoy and 26% mom to 4,701 vehicles.
  • Tata Motors has recently launched six new products in the M&HCV segment, which includes multi-axle trucks, heavy-duty trucks (31-49 tonne capacity), tractor-trailers and tippers. These vehicles have multiple applications and will cater to sectors like mining, construction, road works and logistics.
  • The company also plans to unveil its new one-lakh car scheduled for launch by mid 2008 at the forthcoming Auto Expo.
  • At the current market price of Rs790, the stock discounts its FY2009E consolidated earnings by 12.4x and is available at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.2x. We maintain our Hold recommendation on the stock with a price target of Rs792.

SECTOR UPDATE

Cement

Strong demand buoys volumes
Traditionally, December is a good month for cement companies in terms of volume and price realisation, as construction activities gather pace post-monsoon. For the month, all major cement manufacturers barring ACC reported positive growth in their dispatches. ACC dispatches for December 2007 stood at 15.7 lakh tonne against 16.7 lakh tonne for December 2006, which is 6% lower compared with that of the corresponding period last year. The volume dip was on account of lower production in one of its facilities in the South due to maintenance shut down and rains
.