Published on 25/10/2019 1:41:23 PM | Source: Live Mint

Tata Motors Q2 results seen subdued as JLR, India business falter

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Tata Motors Ltd (TML) is expected to report a subdued performance for the September quarter largely because of flat retail sales clocked by Jaguar Land Rover (JLR) globally. This comes amid a tough quarter for its India business as well across commercial and passenger vehicles.

JLR, which typically accounts for more than 70% of TML’s revenues, reported retail sales of 128,953 units for the quarter ended September, down 0.7% year-on-year. The performance could have been worse but for a recovery in China, its biggest market, where retail sales grew 24.3% year-on-year.

JLR said retails sales were also slightly up (+0.9%) in Europe, which along with China recovery, covered up for lower sales in the US (-1.0%), UK (-5.1%) and in other overseas markets (-19.2%).

ICICI Securities expects JLR to post revenue of GBP 5.5 billion, down about 2% on year, with adjusted EBIDTA (earnings before interest, taxes, depreciation, and amortization) margin of 7.4% (down 170 bps YoY). "On operational basis, we expect JLR to report a loss of GBP 79 million," the report said.

JLR’s flat retail sales, in the backdrop of sharp drops in the past quarters, were clearly driven by the year-on-year growth in Land Rover sales, which stood at 91,630 units in the past quarter, up 4.2%. Jaguar, on the other hand, reported sales of 37,323 units during Q2, down 11% on year.

The company said the Evoque compact sports utility vehicle (SUV) model drove demand for the Land Rover portfolio. The retail sales of the Range Rover Evoque grew 54.6% on year as the all-new model went on sale in the China market. JLR had also disclosed that the Land Rover numbers were driven by strong demand for the Range Rover Sport (+17.5%) and the Jaguar I-Pace (sales of 3,666 units, up by 2,593 units YoY).

Tata Motors’ standalone results are expected to take a bigger hit for the quarter ending September due to continued demand slump for commercial and passenger vehicles in the domestic market. At 94,454 units, TML’s domestic vehicle sales fell a sharp 46% on year, with medium and heavy commercial vehicles (MHCVs) being the worst hit due to axle load norms, low freight volumes and freight rates. The CV business, TML’s backbone in India, is also expected to remain subdued on heavy discounting during the past quarter.

The exports business was hit as well on subdued orders from global markets. TML reported a steep 33% year-on-year decline in its quarterly exports, which stood at 10,577 units.

ICICI Securities expects TML's standalone business to see a 44% on year decline in topline, while EBIDTA margin is expected to fall 407 bps to 4.4%.

Motilal Oswal Securities estimates TML's consolidated revenue to decline 12.3% YoY, resulting in a net loss of ₹14.8 billion (against ₹5.6 billion loss in Q2FY19 and loss of ₹36 billion in Q1FY20). The brokerage expects JLR's net realisation to increase 3.2% YoY, and on a standalone business, it estimates EBIDTA margin to decline to 2.2%, and a net loss of ₹6.1 billion (against ₹1.9 billion net profit in Q2FY19).