Tata Motors Ltd’s stock gained 4.5% in a lacklustre market on Monday. News of an encouraging 42% jump in the September sales volume of its overseas subsidiary, Jaguar Land Rover (JLR), from a year before, was responsible for the spurt.

JLR’s total sales tally for the quarter is 68,000 vehicles, a 23% increase from a year earlier, which beat analysts’ expectations.

Given that JLR alone accounts for a little over half of Tata Motors’ consolidated revenue and three-fourths of the company’s net profit, it’s an ample cause for optimism. In fact, it was JLR’s improving performance that had translated into a hundred-fold increase in Tata Motors’ net profit in the year-ago quarter.

Also, with the domestic environment getting tougher for auto firms, and rising interest rates expected to hit automobile sales going forward, JLR sales will boost consolidated revenue.

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Already, Tata Motors’ domestic passenger vehicle sales were down by about 30% year-on-year during the September quarter, while growth in commercial vehicle sales moderated to 15%. So, the JLR numbers are more than welcome.

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That said, Motilal Oswal Securities Ltd, while reiterating confidence in Evoque, said, “We would wait for sustenance of momentum in volumes, especially since Evoque would witness rise in competition with the launch of Audi Q3 from October."

Investors would have to wait and watch to gauge the impact of Audi Q3 on overall profitability.

According to consensus estimates from three leading brokerages, the robust September quarter now leaves a required cumulative growth rate of around 14% for the second half, down from earlier estimates of a required rate of around 18-20%. No wonder Tata Motors’ stock has seen a continued rise in the last fortnight, despite the negative sentiment in the auto sector.

Will the improvement in JLR’s outlook better consolidated valuations? For now, valuations are weighed down by the expected drop in Tata Motors’ core business of commercial vehicles, mainly trucks. The stock trades at 188, which is around nine times its consolidated fiscal 2012 earnings.

However, in order to change valuations, we would need to see an improvement in the core business.