Book profits in Tata Motors on every rally: StanChart Sec

Its British luxury Jaguar Land Rover (JLR) unit reported consolidated revenue of Rs 43,324 crore in April-June, up 30% from a year ago. Amit Kasat of Standard Chartered Securities told CNBC-TV18 that JLR's margin at 14.5% is in line with expectations.

Standard Chartered Securities downgraded Tata Motors post fourth quarter due to concerns on JLR's volume growth. Kasat believes that concern still remains because market’s expectations from JLR in terms of volume growth are high.

"A monthly run rate of say 27,000 or 28000 units is still doable, but the market's expectation is much higher, if it falters then that maybe a disappointment," he elaborated. He expects JLR’s volume to grow in the range of 10-12% in FY13.

Meanwhile, broking fim Credit Suisse has also downgraded Tata Motors to "underperform" from "neutral" after cutting its volumes forecast and increasing its tax rate assumption for JLR.

Below is the edited transcript of Kasat’s interview with CNBC-TV18.

Q: The JLR margins were held at 14.5% where there any disappointments for you which the market might be reacting to?

A: Definitely, margins at 14.5% were better than what market was looking out for. For me, the margins came in line so there was no disappointment on the margin front from the JLR.

Q: Any volume related issues that you have given the kind of macro numbers that you are seeing?

A: Definitely yes, that’s the only reason that we have downgraded the stock after the fourth quarter. The macro issues are weighing very heavily on the automobile sector globally. JLR is a major player in the global market.

There can be a risk if they are not able to deliver the kind of volumes on a month on month basis for the next nine-10 months the market is expecting.  A monthly run rate of say 27,000 or 28000 units is still doable, but the market’s expectation is much higher, if it falters then that maybe a disappointment.

Q: For the full year what is a realistic number to be working with you think for JLR?

A: A 10-12% growth on what they have done last year. They did close to around 3.13 lakh units last year, so basically 10-12% growth is a realistic scenario.