Mumbai: Tata Motors Ltd, India’s largest automaker by sales revenue, will report its September quarter (Q2 FY19) results on Wednesday.

The sustained turnaround in the domestic business is unlikely to offset a disappointing performance by the UK subsidiary Jaguar Land Rover (JLR) Automotive Plc, as the Tata Group flagship is expected to report a consolidated net loss of Rs874.4 crore on consolidated net sales of Rs72,976.7 crore, according to a Bloomberg poll of six analysts.

During the corresponding quarter a year ago, Tata Motors reported a net profit of Rs2,502 crore on net sales of Rs70,156 crore on the back of a strong performance by JLR and a better-than-expected performance by the domestic subsidiary.

During the three months to June, JLR retail sales fell by 13.23% to 129,887 units, while the domestic market was buoyed by higher passenger and commercial vehicle sales.

Analysts estimate consolidated margins to shrink about 4 percentage points to about 9% during the quarter, driven by negative operating leverage, commodity cost pressures and restructuring of the capitalization structure at JLR. Gains from expressing pound revenues in rupee terms (as the pound appreciated about 5% against the rupee during the quarter) and a richer product mix for commercial vehicles in the domestic market are not expected to outweigh JLR’s poor performance.

Here are a few factors to track in the Q2 results:

JLR volumes

JLR’s retail sales during the quarter slumped 13.23% over the year-ago period to 129,887 units, with only three models out of 13 posting growth, according to company data. These are the new launches—the E-Pace compact SUV, I-Pace electric SUV and Range Rover Velar SUV.

Factors such as a model rundown cycle, geopolitical tensions and disfavor for diesel affected sales in large markets such as North America, the UK and Europe, while there was deferment of purchases in China due to a reduction in import duty.

JLR margins

Analysts expect lower operating leverage, commodity cost pressures and restructuring of the capitalization structure at JLR to shrink the UK subsidiary’s margins. A slowdown in the Chinese market is also expected to impact profitability.

JLR’s Ebitda (earnings before interest, tax, depreciation and amortization) margin is expected to shrink to 7.5%, lower by 4.3 percentage points, said analysts at Prabhudas Lilladher Pvt. Ltd in a 5 October note. The Ebitda margin is a key measure of operating profitability.

Domestic operations

Despite a high base last year, total domestic sales during the September quarter rose by a stellar 29.9% to 174,773 units, as per company data. These numbers were driven primarily by commercial vehicles, with the division clocking 32.84% growth to 120,845 units, on the back of infrastructure-building and broad-based economic growth creating robust demand in sectors such as road construction, mining, retail and e-commerce. The passenger vehicle division grew by 23.65% to 53,928 units.

Led by a richer product mix (of high-tonnage trucks) and higher operating leverage, Tata Motors’ standalone Ebitda margin is expected at 9.7%, up 2.7 percentage points, said analysts at Motilal Oswal Securities Ltd in an early October note.

At 1.32pm, Tata Motors shares traded 1.6% down at 175.7 per share on the BSE. During the September quarter, the Tata Motors stock declined about 17%, while the benchmark Sensex gained 2.3%.

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