Tata Motors net seen up 64% on year

Tata Motors Ltd. is likely to post a 64.3 per cent rise in net profit for the October-December quarter of 2004-05 to Rs 346 crore, according to the average of estimates of 14 brokerages polled by Crisil MarketWire.

Net sales are expected to grow 27.1 per cent to Rs 4,318 crore. The company will detail its third quarter financial results Monday.

Robust volume growth across all segments, cost saving measures and higher exports are likely to drive the company's financial performance during the third quarter, analysts said.

Average realisations are also expected to grow due to higher percentage of commercial vehicles, mainly multi-axle vehicles in the product mix, they said.

Net profit estimates ranged from Rs 267 crore to Rs 471 crore, while projections for net sales ranged from Rs 4,179 crore to Rs 4,494 crore.

Sequentially, the third quarter net profit is expected to grow by a modest 12 per cent due to pressure on operating margins following rising raw material costs and technology upgradation cost for vehicles to match Bharat Stage-III emission norms. Net sales of Tata Motors are likely to grow 4.3 per cent on quarter.

"The margins are expected to fall on-year but hold on on-quarter due to better volume growth and improved product mix," said Janish Shah, senior analyst with Network Stock Broking.

Shah said increase in passenger vehicle sales would boost revenue growth for the company. The growth in profit would be spurred by higher commercial vehicle volumes as such products have better margins than passenger vehicles, he added.

Tata Motors sold a total of 98,657 vehicles during the October-December quarter, showing a 26 per cent rise over the previous year.

Passenger vehicles, which comprised 43 per cent of the total sales, recorded a 29.1 per cent rise to 39,048 units, while that of commercial vehicles rose 26 per cent to 50,908 units during the December quarter.

Analysts said the growth in volumes of the compact car, Indica and mid-sized Indigo as well the utility vehicle, Sumo would help Tata Motors offset the high cost of raw materials and maintain its operating margins on a sequential basis.

Motilal Oswal Securities expects Tata Motors to record a forex gain of 650 million rupees on account of translation gains on the funds.

"We expect the company to account for this gain above the line, resulting in a 160-basis-point inflation in margins for the quarter," the brokerage said.

Karvy Stock Broking expects Tata Motors' operating margins to decline 180 basis points on-year to 12.6 per cent on account of rising raw material costs.

The 52-week high for Tata Motors on the National Stock Exchange is Rs 500.70, while the low is Rs 300.

Today, shares of Tata Motors closed at Rs 492 on the National Stock Exchange, up 2.45 per cent over Thursday.