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General Body Meeting 09.22.11. Mutual Investment Club of Cornell Agenda  Announcements  News Updates  Macro Update  European Renewables  UBS Rogue.

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Presentation on theme: "General Body Meeting 09.22.11. Mutual Investment Club of Cornell Agenda  Announcements  News Updates  Macro Update  European Renewables  UBS Rogue."— Presentation transcript:

1 General Body Meeting

2 Mutual Investment Club of Cornell Agenda  Announcements  News Updates  Macro Update  European Renewables  UBS Rogue Trading  Tata Motors Pitch 2

3 Mutual Investment Club of Cornell News Updates 3

4 Mutual Investment Club of Cornell Operation Twist  FOMC decides to “extend the average maturity of its holdings of securities”  “…purchase $400 billion of Treasury securities…” with proceeds from sale of short term securities  Fed out of short term tools; aims at lowering long term rates, flattening yield curve  Citation of dual mandate; inflation not a current concern

5 Mutual Investment Club of Cornell Obama’s “Buffet Tax Proposal”  New tax rate for individuals making more than $1 million per year  Obama hasn’t specified a rate or how much revenue will be generated by the plan—is leaving it to Congress to calculate  Many investors pay no more than 15% of income—capital gains, dividends, “carried interest”  Sharpening contrast between Dems/Reps heading into

6 Mutual Investment Club of Cornell Renewables - Government Legislation OVERVIEW  Grid Parity Pressure – LCOE* ($/MW)  Conventional Coal –$ 65.3  Wind –$ 83.9  Wind Offshore –$209.3  Solar PV –$194.6  Solar Thermal –$259.4  Government Legislation & Subsidies  FiT  RPS  ITC / ITC Cash Grant / PTC  DOE Loan Guarantee Program *Source: Energy Information Administration, Annual Energy Outlook 2011, December 2010, DOE/EIA-0383(2010)

7 Mutual Investment Club of Cornell Renewables - Government Legislation EUROPEAN & NORTH AMERICAN UPDATES  U.S.  ITC Cash Grant – 12/2011; DOE Loan Guarantee – 9/2011  ITC – 12/2016  RPS Standards boosting renewable energy activity  Brazil  Reverse Auction Mechanism – Tariffs 42% lower than PROINFA  Germany  Retroactive FiT cuts + caps; Expecting further cuts 01/2012  Accelerated nuclear fears – Shuts 7 of 17 nuclear power plants  Italy  Budget issues along with lack of transparency; retroactive FiT cuts  Spain  Most days of sun in Europe; generous FiT; retroactive cuts; installation caps

8 Mutual Investment Club of Cornell UBS Rogue Trader  $2.3 billion loss  3 Years in the making  UBS Market Cap down 4.4 billion  UBS internal controls questioned

9 Mutual Investment Club of Cornell Tata Motors (NYSE: TTM) Miles Moen John Yoshida

10 Mutual Investment Club of Cornell Overview  Thesis  Macro Overview  Industry Overview  Business Overview  Analysis  QuanTeam  Proposal

11 Mutual Investment Club of Cornell Main Thesis Points  Current short-term risks outweighing long-term potential  Current price level makes investment extremely attractive  Short term play for correction  Geographic and risk diversification for portfolio

12 Mutual Investment Club of Cornell Macro Overview

13 Mutual Investment Club of Cornell India’s Current Economic Condition GDP: 1,537 billion dollars Inflation Rate: 9.22% Interest Rate: 7.25% Exchange Rate: Rupees: 1 Dollar Unemployment Rate: 9.4% Sustained long run growth is expected 13

14 Mutual Investment Club of Cornell Macro take on Auto Industry  Leading export destinations:  UK  EU  South Africa  Need for further infrastructure investment  Impact of oil prices  Indian Automotive Mission Plan  Allow 100% FDI 14

15 Mutual Investment Club of Cornell India’s Middle Class Consumer & Demographics ,000 INR  Average Income in 2011  *TATA Nano = 100,000 INR  Middle class size projected in 2025  *From 50 million in ‘10  Percentage Poverty decline in 5 yrs.  *(37.2% in ’04 to 32% in ‘09) Rapid growth of middle class + Greater demand for individual mobility (i.e. luxury goods) = Rising Demand for Automobiles Over the next 20 years, we expect to see spending on cars growing by 12 percent per year (McKinsey & Co.) 583 million -5.2%

16 Mutual Investment Club of Cornell Industry Overview

17 Mutual Investment Club of Cornell Auto Manufacturing Overview  Increasingly competitive space  Race to the bottom for lower end cars  Demand factors  Fuel prices  Access to capital  Road infrastructure  Stricter emission standards

18 Mutual Investment Club of Cornell Competition  Auto manufacturers are increasingly diversifying  Lots of cars for any given space  Increasing reliance on brands  Sourcing raw materials increasingly important to price

19 Mutual Investment Club of Cornell Fuel Prices  Increasing cost of diesel and gasoline  Leads to less demand from trucking companies due to smaller margins  Improving technologies help increase fuel efficiency  Consumers also weary of purchasing gas guzzling cars

20 Mutual Investment Club of Cornell Access to Capital  Many purchasers use credit to afford a vehicle  Higher interest rates leads to less purchases  India has been raising rates to combat inflation  Customers also worried about another credit crunch

21 Mutual Investment Club of Cornell Road Infrastructure  Improved roads and infrastructure leads to higher demand  Trucking goods becomes a viable alternative  Especially prevalent in developing nations  People need roads to drive on, otherwise no point to owning a car

22 Mutual Investment Club of Cornell Road Infrastructure  $105 billion US to be spent over next 5 years to improve roads

23 Mutual Investment Club of Cornell Emissions  Countries are implementing tougher emission standards  Requires expensive redesigns of cars and new technology  Will require company’s to change over their fleets of trucks

24 Mutual Investment Club of Cornell Business Overview

25 Mutual Investment Club of Cornell Tata Motors  India’s largest automobile company  3 rd largest bus manufacturer in the world  4 th largest truck manufacturer in the world  Market leader in commercial vehicles  3 rd largest manufacturer in passenger cars

26 Mutual Investment Club of Cornell Subsidiaries  Many subsidiaries and affiliates  Allows world-wide reach  Vertical integration throughout process

27 Mutual Investment Club of Cornell India Business  Large industry growth in both commercial and passenger vehicles  60% market share in commercial vehicles  Continue to expand product offering  Focus on low cost and reliability  Expanding and innovating to maximize growth

28 Mutual Investment Club of Cornell Commercial Vehicles  Dominance in market share in all commercial vehicle markets

29 Mutual Investment Club of Cornell Small Vehicle Growth  Strong predicted growth in small commercial vehicles  Tata dominates with Ace brand

30 Mutual Investment Club of Cornell Exports  Exports of Tata branded cars grew 70%  Mainly to Asian countries  Building facilities in other areas to improve reach  South Africa just opened

31 Mutual Investment Club of Cornell Expansion  Significant capacity to expand production to meet increased demand  As macro conditions improve, large uptick in demand expected

32 Mutual Investment Club of Cornell Jaguar Land Rover  Acquired in 2008 to complement business  Brings strong brand presence and luxury line  Cutting edge design and manufacturing techniques  Focus on low emissions and clean technology  Bring to BRICs and developing nations  43% growth in China and Russia  Fleet refresh will lower average model age to 2.5 years

33 Mutual Investment Club of Cornell Luxury Growth  Untapped potential in lower luxury  Vertical integration could help undercut competitors

34 Mutual Investment Club of Cornell Luxury Growth  Significant expected growth in luxury segment  Lead especially through China

35 Mutual Investment Club of Cornell Land Rover Evoque  New Land Rover model looks to be major hit  Already 20,000 pre-ordered, will help volume

36 Mutual Investment Club of Cornell Analysis

37 Mutual Investment Club of Cornell Summary Financials TTM Financial Summary $MM Unless Otherwise Noted Actual FY2009AFY2010AFY2011A Income Statement Items Revenue15,06419,15026,597 % GrowthN/A27%39% Gross Profit2,3193,2815,181 % Margin15%17%19% EBITDA2211,0863,274 % GrowthN/A391%201% % Margin1%6%12% EBIT(319)2632,250 % GrowthN/A 755% % Margin(2%)1%8% Net Income(534)5392,039 % GrowthN/A 278% EPS($0.24)$0.18$0.64 % GrowthN/A 247%

38 Mutual Investment Club of Cornell Balance Sheet Analysis  Cash and Cash Equivalents: $2.0Bn  YoY Change: +$600MM  Has increased cash position while maintaining debt levels  Current Ratio: 0.80

39 Mutual Investment Club of Cornell Stock Price Analysis (1-Year)

40 Mutual Investment Club of Cornell Stock Price Analysis (5-Year)

41 Mutual Investment Club of Cornell Comparables CompanyTickerP / EPEGGross Margin Operating Margin Dividend Yield TTM %7.0%2.59% F %4.4%N/A GM %3.9%N/A TM %2.5%1.72% NSANY %5.3%1.35% DDAIF6.97N/A23.3%7.3%4.99% VLKAY %5.6%2.12%

42 Mutual Investment Club of Cornell DCF Summary  EV/EBITDA Multiple Range: 7x – 8x  WACC: 9% $19.16 –  Current Share Px: (18% -30% Upside)  As of 9/21/2011

43 Mutual Investment Club of Cornell QuanTeam

44 Mutual Investment Club of Cornell Tata Motors  Bollinger Bands  Volatility bands placed 2 standard deviations above and below an EMA

45 Mutual Investment Club of Cornell Tata Motors  Relative Strength Index (RSI)  Compares the magnitude of recent gains to recent losses

46 Mutual Investment Club of Cornell Tata Motors  Williams (WLPR)  Compares a stock's close to the high-low range over a14 days

47 Mutual Investment Club of Cornell Tata Motors  Moving Average Convergence Divergence (MACD)  Difference between 26 day EMA and 12 day EMA  Signal Line – 9 day EMA

48 Mutual Investment Club of Cornell Tata Motors  Technical Analysis  Thesis MACD- Shows a significant movement back towards middle ground; upside limited to 5% before resistance RSI-Middle of the road; neither hints at upside or downside BOLL-Middle of the road; neither hints at upside or downside WLPR- Indicates strong upwards momentum over past week; not a favorable entry point  Summary Not the best entry point after the recent market movement, but upside remains, and chasing a bottom is unneccessary

49 Mutual Investment Club of Cornell Proposal

50 Mutual Investment Club of Cornell Proposal  Build $3,000 position  Currently less than 10% of portfolio in EM  Short-term Outlook < 1 Year  Revisit after 20% share price appreciation Questions?

51 Mutual Investment Club of Cornell Thanks for coming by! 51


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