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Informist, Wednesday, Nov. 6, 2024

By Darshan Nakhwa

MUMBAI – Commercial and passenger vehicle manufacturer Tata Motors Ltd. is expected to report strong growth in consolidated net profit for the September quarter even as other earnings metrics are seen flat on year. According to analysts, a richer product mix and higher average selling prices of Jaguar Land Rover and commercial vehicles are expected to drive the automaker's bottom line for the quarter despite despatches declining.

The consolidated net profit of Tata Motors is projected to grow 32% on year to INR 49.78 billion, as per the average of estimates from eight brokerages. The highest projection for the bottom line is INR 55.96 billion by Kotak Institutional Equities, and the lowest is INR 42.70 billion by Motilal Oswal Financial Services Ltd.

The company's top line for the quarter is estimated at INR 1.05 trillion, flat on year. Among the estimates, the highest projection for revenue is INR 1.10 trillion by YES Securities (India) Ltd. and the lowest is INR 1 trillion by Motilal Oswal.

According to Nuvama Wealth Management Ltd., the automaker's top line is expected to be flat owing to muted volume performance across divisions. Kotak Equities expects the company's standalone business revenue to decline by 18% on year in Jul-Sept, led by an 11% on-year decline in volume. However, it expects the company's revenue from the Jaguar Land Rover business, excluding from its joint venture with Chery Automobiles in China, to grow by 4% on year, driven by a richer model mix in overall sales.

The company's consolidated cash operating profit, or earnings before interest, tax, depreciation, and amortisation, is estimated at INR 144.14 billion, compared with INR 144.24 billion in the year-ago period. Among the seven estimates for EBITDA, the highest projection is INR 153.94 billion by Elara Securities (India) Pvt. Ltd. and the lowest is INR 130.70 billion by Nomura Research.

For Jul-Sept, Tata Motors is seen reporting an EBITDA margin in the range of 13.0-14.5%, according to the estimates from seven brokerages. In the year-ago period, the company had reported an EBITDA margin of 13.7%. A quarter ago, the margin was 14.4%.

The automaker's EBITDA margin is likely to expand on a year-on-year basis because of improved profitability in the Jaguar Land Rover, India commercial vehicle, and India passenger vehicle divisions, Nuvama Wealth said in a report. According to Prabhudas Lilladher Pvt. Ltd., the impact of supply chain constraints is likely to be partially offset by lower penetration of the Jaguar portfolio, which could result in an expansion of the EBITDA margin by 67 basis points on year.

In terms of average selling price, the company's JLR realisation is seen expanding 4% on year to 73,656 pound sterling per unit, and commercial vehicle realisation is expected to inch up by 2.4% on year to INR 1.93 million, according to Motilal Oswal. In comparison, the average selling price of passenger vehicles is likely to decline 5.7% on year to INR 831,100 per unit.

On a sequential basis, Tata Motors is likely to report weak financial performance on account of a decline in overall sales. The automaker's bottom line is projected to decline by 11% on quarter, EBITDA by 7.4%, and top line by 3%.

WHOLESALE VOLUMES

The global wholesale volumes of Tata Motors, including Jaguar Land Rover, were at 304,189 units in Jul-Sept, down 11% on year. The automaker recorded a decline across all vehicle categories in both domestic and international markets during the quarter. While sales of commercial vehicles, including the Tata Daewoo range, declined 19% on year to 86,133 units, its passenger vehicle despatches fell 6% on year to 130,753 units.

During the quarter, retail sales of most passenger vehicle manufacturers were hit by weak consumer demand, the Shraddh period of remembrance that is considered inauspicious by many Hindus, and uncertain weather conditions in India. This resulted in a historically high inventory of 80–85 days with dealers, which weighed on passenger vehicle makers' wholesale despatches.  

In the September quarter, Tata Motors subsidiary Jaguar Land Rover sold 87,303 vehicles, 10% lower than in the year-ago period. It dispatched 5,961 units of Jaguar-branded vehicles during the quarter, and 81,342 units of Land Rover-branded vehicles.

In Jul-Sept, Tata Motors' standalone wholesale volume came in at 215,034 units, down 12% on year. While its domestic despatches fell 11% on year to 209,861 units, its exports fell 12% on year to 5,173 units.

Tata Motors is scheduled to detail its earnings for Jul-Sept on Friday. On Wednesday, shares of the automaker closed at INR 839.70 on the National Stock Exchange, up 0.5%. The company's stock has declined 27% since its Apr-Jun earnings announcement on Aug. 1.

Following are the Jul-Sept consolidated earnings estimates for Tata Motors, in INR million, from eight brokerages:

End

Edited by Rajeev Pai

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