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Aug 06, 2013, 07.17 PM IST | Source: Moneycontrol.com

Here's what to expect from Tata Motors Q1 earnings

Tata Motors will continue to report sluggish sales growth in the domestic market, which will be offset by Jaguar Land Rover sales growth. Overall, however, the company is likely to report a consolidated net profit decline.

Moneycontrol Bureau

The slowdown in the Indian economy has hit truck and bus makers. Sluggish demand has forced companies like Tata Motors and  Ashok Leyland to offer huge discounts, and that has impacted profits.

Tata Motors, India's largest commercial vehicle maker, which reports its first quarter earnings on Wednesday, is also struggling to sell its passenger cars. However, the street will be more keen to hear about Jaguar and Land Rover. The British luxury car and SUV maker has been driving growth in earnings as well as the stock for some time now, given that it contributes as much as 90 percent of Tata Motors' earnings.

"In Q1, we expect Tata Motors' consolidated profits to register 9.4 percent year-on-year decline; while JLR's good performance continues, the  Indian operations are expected to continue to be a drag due to the slump in CV sales and lower passenger vehicle sales," says Rohan korde of Anand Rathi Shares.

Korde expects JLR to report 12 percent YoY rise in revenue to GBP 4.1 billion, while profit will likely rise 17 percent to GBP 334 million.

It must be noted that Tata Motors had reported a one-time loss of Rs 440 crore in the corresponding quarter of the previous year on account of revaluation of foreign currency loans.

Goldman Sachs expects strong product pricing and margins at JLR.

"Our product mix calculations imply an ASP increase of 2-4 percent (QoQ and YoY) for JLR during this quarter (versus 1.5 percent YoY decline during FY13). This is mainly driven by positive mix impact from new Range Rover, F-Type and all-wheel drive Jaguars, partially offset by negative mix impact from smaller engine Jaguars and weaker sales in older Range Rover Sport," say analysts Sandeep Pandya and Sumeet Jain.

The Goldman Sachs analysts expect Tata Motors' consolidated net sales to rise 6 percent from a year ago.

"It will be a modest show led by sharp 19 percent YoY decline in standalone volumes supported by 11.5 percent growth in JLR," says Emkay Global Financial Services.

The brokerage expects the company to report a net profit of Rs 2,010.5 crore, down 21 percent year-on-year, while net sales are seen up 6 percent to Rs 45,841 crore.

KEY THINGS TO WATCH

- Current demand and outlook for CVs in the domestic market
- Discounting levels in the Indian CV market
- Standalone and consolidated margins in the quarter
- JLR demand in China, North America, UK and Europe and the road ahead
- Road map for new product launches

STOCK WATCH

Tata Motors shares closed at Rs 287.55 on NSE on Tuesday, up 1 percent. Since March-end, the stock is up near 7 percent, outperforming the wider Nifty index, which is down 2.5 percent.

Goldman Sachs has a "buy" rating on Tata Motors. Among others, Brics Securities and Anand Rathi recommend a "buy" and Emkay advises investors "accumulate" the stock.

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