Srotaswini Mohapatra
Pune, 3 August 2024
TTMT’s consolidated revenue for Q1FY25 grew by 5.7% YoY, aligning with PLe/BBGe expectations, driven by strong performances in its JLR and CV business units, although the PV business saw a decline due to reduced volumes. The EBITDA margin increased by 110bps YoY to 14.4%, surpassing PLe/BBGe estimates of 15%/13.9%. The JLR EBIT margin improved by 30bps YoY to 8.9%, with the company maintaining its target of ≥8.5% EBIT margin and aiming to reduce its net debt in FY25. TTMT mentioned that the slowdown in the EV sector was attributed to decreased purchases by fleet operators. Nevertheless, the company’s top two models continue to perform well, and the upcoming launch of the Curvv is expected to boost volumes. The company remains positive about the growth potential of its CV business, driven by infrastructure development and increased industrial capital expenditure.
The company maintains its positive view on TTMT due to the following factors:
i. The JLR business is expected to deliver sustainable growth.
ii. The CV business is likely to show robust performance driven by replacement demand and higher tonnage vehicles.
iii. Cost reduction and mix improvement should enhance profitability
iv. The demerger and listing could support sustained growth for the respective businesses and benefit shareholders. Given these factors, the company estimates revenue and EBITDA to grow at a CAGR of 11.6% and 20%, respectively, over FY24-26E. The recommendation remains “Accumulate” with a SoTP-based target price of Rs1,254, up from the previous Rs1,089.
Lower volume and mix impact PV business: Revenue declined by 7.7% YoY to Rs118.5bn led by 1.3% decline in overall volume dragged by 14.3% de-growth in EV volume and lower mix in the ICE volume. As a consequence, its ASP declined by 6.6% YoY to Rs854,257/unit. EBITDA increased by 4.1% YoY to Rs91bn, while margin was at 7.6% excluding PDE expenses and at 5.8% including PDE expenses. The management attributed the slowdown in demand to heatwave and elections, and expects good demand in the upcoming quarter with new launches and arrival of the festive season.
Robust operational performance in CV business: Revenue increased by 5.1% YoY to Rs178.5bn, driven by 6.3% YoY expansion in volume as ASP remained flat. EBITDA came in at Rs20.8bn, up by 30% YoY with a margin expansion of 220bps YoY to 11.6%. The robust operational performance was led by mix improvement and cost reduction efforts to improve overall profitability.
Volume-led growth in JLR: Revenue expanded 5.4% YoY to GBP7.3bn driven by increase in volume by 4.8% YoY, while realization remained flat at GBP74,024/unit. EBITDA increased by 2.3% to GBP1.5bn, while EBITDA margin contracted by 50bps YoY to 15.8%, owing to the rise in variable marketing expenses to complement its sales. EBIT grew by 9.2% YoY to GBP639mn with a margin expansion of 30bps YoY to 8.8%. PAT came in at GBP502mn against GBP323mn in Q1FY24.
