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Summary of Contents
PULSE TRACK
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Export growth remains weak
STOCK
UPDATE
Tata
Motors
Cluster: Apple Green
Recommendation:
Buy
Price target: Rs1,075
Current market price: Rs774
Good performance
Sales highlights
-
Tata Motors (TAMO) has reported decent numbers
for February with an overall growth of 19% as its total sales rose
to 53,707 units in the month from 45,113 units last February.
-
The growth in the commercial vehicle segment
continues to be strong despite the high base of last year. The
segment recorded a 22% growth in February. The medium and heavy
commercial vehicle segment saw a growth of 19.4% while the light
commercial vehicle sales grew by 25.3% year on year (yoy).
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The passenger car sales were slower in February
compared with that in the earlier months, with an overall growth
of 12.8%. Indica reported sales of 12,580 units (up 19% yoy) while
the Indigo family registered a decline of 6% in sales.
-
The utility vehicle segment reported a
phenomenal growth of 40.7% during the month, led by the strong
sales of both Sumo and Safari. Safari sales grew by a staggering
258% to 2,009 units.
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TAMO's exports for the month stood at 4,526
vehicles as compared with 4,257 vehicles in February 2006. That's
a growth of 6% yoy.
-
At the current market price the stock is
trading at 12.3x its consolidated FY2008E earnings and at an
enterprise value/earnings before interest, depreciation, tax and
amortisation of 6.4x. We remain bullish on the stock and maintain
our Buy recommendation with a price target of Rs1,075.
SECTOR
UPDATE
Information
Technology
Minimal impact on earnings
There is a
growing consensus among tax consultants and the management of the
leading information technology (IT) companies that the levy of the
minimum alternate tax (MAT) would have a minimal or absolutely no
impact on the earnings of IT companies.
To put it in
perspective, the IT companies would have to pay additional tax on
income from the Software Technology Park (STP) registered units (@
of 11.3% now), resulting in cash outflow to the tune of 1-2.5% of
their revenues. However, the same would not get reflected in their
profit & loss account due to the creation of a deferred tax
asset. That's because the MAT payable in FY2008 and FY2009 can be
carried forward and be set off against the full tax payable on the
income from the STP registered units with effect from FY2010. This
largely eliminates the concerns related to a possible decline of
3-6% in the earnings .
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