The newly launched ”Indica Vista” has failed to put brakes on the declining volumes. Sales declined by 29% y-o-y to 6,749 vehicles.
However, A3 segment (”Indigo Marina” and ”Indigo CS”) continued to grow and posted 21.3% y-o-y increase to 1,673 vehicles.
UV sales continued its negative trajectory, declining by 62% yoy to 1,416 vehicles.
Declining IIP has throttled freight demand, which in turn has curtailed MHCV purchases by operators. The downfall in the segment was restricted by LCV which declined 38% y-o-y compared to a decline of 69.5% y-o-y in MHCV sales.
We foresee standalone earnings plummeting 63% y-o-y in FY09E (FDEPS Rs10.7) and 13% y-o-y in FY10E (Rs14.3), translating to a P/E of 11.3x FY10E EPS, this on an expected RoE of 5%.
Though the stock has corrected 80% from peak, Tata Motors faces multiple challenges, both global and local, and this could be a dampener to valuations for quite some time. We thus recommend a SELL on the counter.