In Q1FY17, consolidated numbers posted a 10% yoy growth while at the bottomline the numbers saw a dip of 64% on reported basis. However, on adjusted basis, the profits were down 52%. This fall was a result of weak JLR margin performance. Although the realizations were up by 2.9% qoq and flattish yoy, EBITDA margins adjusted for MTM losses stood at 14% as three main factors led to this performance – 1). Adverse forex hedges led by GBP depreciation. 2). Lower market incentives, mainly in China and 3). Higher launch expenses. On the standalone business side, margins came at 5.1% which were in-line with our subdued expectations. This was a result of weak MHCV sales in the quarter. PAT at ?258 mn came in lower than expectations due to higher depreciation and lower other income.

Valuation: LKP Securities have pruned down their estimates for FY17 on weak JLR margin expectations but have raised FY18 estimates as we expect better margin performance by then along with strong sales on new launches, improving Chinese demand and China JV profits. Robust domestic business may add some flavor too. The stock still looks attractive to us as it trades at a PE of 9.2x on FY18E estimates. Maintain BUY, target price raised to ?586.