Tata Motors Q1 results: What to watch out for

Tata Motors, India’s largest automaker by sales revenue, is expected to report a net profit of Rs2,533 crore, according to a ‘Bloomberg’ poll of 23 analysts


Tata Motors is set to report its earnings on Friday. Photo: Ramesh Pathania/Mint
Tata Motors is set to report its earnings on Friday. Photo: Ramesh Pathania/Mint

Mumbai: Tata Motors Ltd, India’s largest automaker by sales revenue, is set to report its earnings for the June quarter on Friday. The Tata Group flagship, which is driven by its UK subsidiary Jaguar Land Rover (JLR) Automotive Plc, both in terms of profitability and revenue, is expected to report a net profit of Rs.2,533 crore, according to a Bloomberg poll of 23 analysts, and a net sales of Rs.65,111 crore, according to 24 analysts.

Driven by new models, JLR continued to turn in brisk volumes, but a slowing truck sales impacted margins in the home market. Analysts estimate margins at both the India entity and JLR to have crimped during the quarter as contribution of cheaper models go up in the overall sales mix.

Here are a few things to watch out for in the first quarter results for fiscal 2017.

JLR volumes

Led by a strong volume growth across most of the markets, the Jaguar F Pace and Land Rover Discovery models sold 134,000 units in the June quarter, up 17% from the year-ago quarter. The growth was led by new Jaguar models such as F Pace and XE, which catapulted Jaguar sales by 63%.

Helped by new launches, the China volumes during the quarter rose more than three times to 13,500 units as compared to 3,800 units a quarter ago. Even other countries saw sales advance at a brisk pace.

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Margins

Despite a strong volume growth, margins at the UK subsidiary are likely to come down as realisation is expected to contract with higher contribution of cheaper models. JLR margins are expected to contract 110 basis points year-on-year to 14%, wrote Nitesh Sharma, analyst at PhillipCapital India, in an earnings preview note.

Domestic operations

Launch of the Tiago hatchback arrested the decline in passenger vehicle volume and propped up the car sales by 7%. Sales of medium and heavy duty trucks and buses rose 8% during the quarter, while that of light commercial vehicles went up 14%. As a result of higher contribution of cars and light trucks, overall margins are expected to contract by as much as 190 basis points quarter-on-quarter, wrote Sharma.

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