Tata Motors Q3 preview: Standalone revenue, PAT may come softer QoQ; JLR may deliver better operating margins

Tata Motors is expected to report its December quarter (Q3FY24) scorecard on Friday, February 2. The automobile firm is expected to report a year-on-year growth in revenue and profit, however, sequentially, the numbers may come subdued.

However, Tata Motor’s JLR (Jaguar Land Rover) business may deliver better operating margins on higher sales and a favourable mix of products.

Also Read: Q3 Results today: Indigo, Tata Motors, Bank of India, Delhivery, Andhra Papers and more to post earnings on February 2

As Mint reported earlier, Jaguar Land Rover reported a 27 per cent year-on-year growth in its Q4FY24 wholesales at 101,043 units, and 29 per cent retail pick-up year-on-year, with deliveries in the UK up 55 per cent, China 28 per cent, Europe 27 per cent and North America 6 per cent on a yearly basis. Moreover, the bulk of its deliveries comprised high-margin models including the Range Rover, Range Rover Sport and Defender, accounting for over 62 per cent of its sales in the December quarter.

Brokerage estimates

According to the estimates of Phillip Capital, Tata Motors' standalone revenue may decline by 3 per cent quarter-on-quarter (QoQ) led by a 7 per cent degrowth in volumes. However, on a year-on-year (YoY) basis, revenue may rise 14 per cent.

Profit after tax (PAT) may decline 19 per cent QoQ but surge 103 per cent YoY. EBITDA margin may decline by 29bps QoQ and rise by 184 bps YoY.

Kotak Institutional Equities estimates standalone business revenues to increase by 11 per cent YoY in Q3FY24, led by (1) a 1 per cent YoY improvement in volumes due to strong demand trends in MHCV trucks and passenger segment and (2) a 10 per cent YoY increase in ASPs due to richer product mix and price hikes taken over the last one year.

Overall, Kotak expects EBITDA margin to decline by 10 bps QoQ to 10.6 per cent, driven by negative operating leverage in Q3FY24. We also expect the domestic PV business EBITDA to improve to 7.3 per cent (+90 bps QoQ) in Q3FY24, driven by a richer product mix (higher mix of SUV segment).

Kotak expects JLR volumes (excluding China JV) to increase by 5 per cent QoQ, led by a strong order book. Overall, Kotak expects revenues (excluding China JV) to increase by 7 per cent QoQ in Q3FY24.

"We expect reported EBITDA margin to increase by 80 bps QoQ to 15.7 per cent, driven by richer product mix and operating leverage benefit. As a result, we expect JLR's EBIT margin to come in at 8.3 per cent in Q3FY24. On a YoY basis, EBITDA is sharply up mainly on account of lower base as the company was facing supply-chain issues during Q3FY23," said Kotak.

Brokerage firm Motilal Oswal Financial Services underscored Tata Motors' India business performance was a mixed bag as CV volumes remained flat YoY while PVs saw a slight growth of 5 per cent YoY.

"CV’s EBIT margin is likely to contract 70bp QoQ to 6.5 per cent due to lower volumes sequentially. However, PV’s EBIT margin is likely to see a slight improvement of 20bp to 1.9 per cent due to stable volumes and better cost-control measures," Motilal Oswal said.

According to Motilal Oswal, JLR volumes may grow YoY due to easing chip shortages and traction towards newer models. The brokerage firm estimates an EBIT margin of 7.4 per cent (+10bp QoQ) for JLR supported by an improved mix, stable raw material costs, and operating leverage.

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