FY13 JLR volume target steady at 3,60,000 units: Kotak Inst

Tata Motors ' April global sales were unimpressive which came in at 87,377 units. Their total JLR global sales came in at 25,143 units. April global CV sales came in 8% lower at 38,008 units YoY.

In an interview to CNBC-TV18, Hitesh Goel, analyst at Kotak Institutional Equities breaks down the numbers and tells investors how they should play the stock going ahead.

Below is an edited transcript of his interview. Watch the accompanying video for more.

Q: What did you make of the numbers of Tata Motors? Have you rated as a blip the kind of slip they have seen month-on-month (MoM) or do you think sales are likely to start falling from here?

A: If we have to look at it from a MoM perspective, I think the sales are below expectation by 10-13%. If you look at the MoM, there is a decline of 30% and historically it is around 20%. The sales are even weaker to that extent because if you include Evoque which is a new addition to the portfolio did around 8,000 volumes this month. So excluding Evoque the volumes are down 12% which is a big disappointment.

But I think in the last quarter, there was some inventory build-up on JLR which is now getting corrected to some extent. Overall, the expectations are higher from volumes for next year which could get revised and little bit down because of weaker demand in Europe but China continues to do well for them so I don't see a major impact on consensus estimates for next year. But yes, it is a little bit of a disappointment.

Q: Any reason to believe that this could be just a one month blip and the numbers might bounce back next month or you would be unclear or uncertain about that?

A: China is not showing any signs of slowdown as of yet although the macro news which is coming across is very weak. On the luxury car side, most of the manufacturers are reporting very strong growth. I don't see China getting impacted on the luxury car side in the near term but Europe could surprise on the downside in my view where you could see weaker numbers whereas the US will hold off well. I think only Europe which is 45% of sales could be a concern otherwise I don't see a major impact on the US or China.

Q: Are you cutting your own JLR estimates for the year and your price target for the stock after this?

A: Not really. Actually, my numbers are anyways lower than street of around 352,000. The consensus has moved to 370,000. I think they can easily do 3,60,000 because of Evoque. I don't see a major concern on my price target as of now.

Q: Would you expect that the greater pressure would show up on the premium category and that may pinch margins for Tata Motors?

A: That is more of a longer term concern because historically if you look at margins for BMW, Audi and all these players, have moved up by 3% from historical level from 8% EBIT there. For BMW the margins are close to 12% because of China- you are selling vehicles at a huge premium in eastern part of China which is a fairly richer society.

Now most of these manufacturers are moving towards western side where the per capita incomes are lower and you would start seeing that playing out over the next 2-3 years where margins will start going down because these guys cannot afford the higher range SUVs which these guys are selling and making money on that. In the near term the currency would be more important. How currency moves which will determine margins otherwise from product portfolio perspective I don't see a major downside to margins per se.