Tata Motors Q3: Demand trends for JLR, impact of forex hedge loss eyed

Automobile major Tata Motors is scheduled to report it December quarter earnings today. The result will be watched for current demand trends for JLR and outlook for key markets.

Tata Motors posted a consolidated net loss of Rs 1,009 crore for the second quarter ended September 30, 2018, mainly due to a weak performance by its British arm Jaguar Land Rover (JLR). The company had reported a net profit of Rs 2,501.67 crore in the July-September quarter of 2017-18. Total revenue from operations had risen 3.3 per cent to Rs 72,112.08 crore as compared to Rs 69,838.68 crore in the year-ago period. JLR revenue, however, declined 11 per cent to 5.6 billion pounds.

 
Here’s what top brokerages expect from Tata Motors December-quarter result
 

Motilal Oswal 

Consolidated revenues are estimated to grow 4.5 per cent year-on-year (YoY) (+7.4 per cent quarter-on-quarter (QoQ), with EBITDA (Earnings before interest, tax, depreciation and amortization) margin contracting 70bps YoY to 10.8 per cent. We estimate consolidated PAT of Rs 410 crore.

We expect JLR’s (including JV) volume to decline by 8.7 per cent YoY (+11 per cent QoQ), impacted by slow demand and deferment of purchase in China due to the reduction in import duty.

JLR’s net realization is expected to increase by 1.8 per cent YoY (+0.2 per cent QoQ). JLR’s EBITDA margin would contract 20bp YoY (+160 bp QoQ) to 10.7 per cent.  We cut FY19/20 consolidated PAT (profit after tax) by 15 per cent/3 per cent. For JLR, we marginally raise our volume and margins estimates. The stock trades at 7.7x FY20E EPS. We maintain ‘Buy’ rating.

 
Key monitorables include current demand trends for JLR and outlook for key markets, demand trend in domestic markets and new product launch, and impact of forex hedge loss.

ICICI Securities

We expect challenging times to continue at Tata Motors amidst nearly flat volumes in the domestic business (1.72 lakh units) and likely 7.4 per cent decline in volumes at JLR (1.47 lakh units). At JLR, with focus on cost control, we expect EBITDA margins to improve 40 bps QoQ to 9.5 per cent. On a consolidated basis, sales in Q3FY19 are expected at Rs 78,340 crore, up 6.7 per cent YoY. EBITDA is expected at Rs 8,614 crore (EBITDA margins at 10.9 per cent, flat QoQ). At the PAT level, we expect Tata Motors to report a profit of Rs 486 crore (Rs 1,215 crore in Q3FY18).

 
Prabhudas Lilladher

The standalone domestic volumes over Q3FY19 were flat YoY, down nearly 10 per cent QoQ. Further, on account of higher discounting in the industry, we expect standalone margins to be at 7.3 per cent, down 120bps YoY as well as QoQ. JLR’s Q2FY19E volumes are expected to be flat YoY, up nearly 14 per cent QoQ, with margins at 11.4 per cent, higher 50bps YoY, up 230bps QoQ.

STOCK PERFORMANCE
Company Name	BDP_Date	BDP_Close	BDP_Date1	BDP_Close1	Change (%)
Cummins India Ltd.	06-Feb-2019	801.15	28-Sep-2018	674.70	18.74166296
Bajaj Auto Ltd.	06-Feb-2019	2771.45	28-Sep-2018	2687.10	3.139071862
S&P Bse Sensex	06-Feb-2019	36975.23	28-Sep-2018	36227.14	2.064998783
Hero MotoCorp Ltd.	06-Feb-2019	2875.15	28-Sep-2018	2932.15	-1.943966032
Maruti Suzuki India Ltd.	06-Feb-2019	7191.10	28-Sep-2018	7350.55	-2.169225432
Bosch Ltd.	06-Feb-2019	19240.50	28-Sep-2018	19817.45	-2.911323102
MRF Ltd.	06-Feb-2019	60052.65	28-Sep-2018	63677.65	-5.692735206
Apollo Tyres Ltd.	06-Feb-2019	198.85	28-Sep-2018	212.35	-6.357428773
S&P Bse Auto	06-Feb-2019	19262.54	28-Sep-2018	21476.52	-10.30883961
TVS Motor Company Ltd.	06-Feb-2019	491.00	28-Sep-2018	557.20	-11.88083274
Eicher Motors Ltd.	06-Feb-2019	21110.20	28-Sep-2018	24165.25	-12.64232731
Exide Industries Ltd.	06-Feb-2019	218.80	28-Sep-2018	265.15	-17.48067132
Mahindra & Mahindra Ltd.	06-Feb-2019	694.55	28-Sep-2018	860.70	-19.30405484
Motherson Sumi Systems Ltd.	06-Feb-2019	137.50	28-Sep-2018	171.20	-19.68457944
Bharat Forge Ltd.	06-Feb-2019	481.75	28-Sep-2018	601.00	-19.84193012
Tata Motors Ltd.	06-Feb-2019	178.20	28-Sep-2018	223.45	-20.25061535
Balkrishna Industries Ltd.	06-Feb-2019	786.00	28-Sep-2018	1019.55	-22.90716493
Ashok Leyland Ltd.	06-Feb-2019	82.50	28-Sep-2018	119.05	-30.70138597
Source: ACE Equity