JLR margins too high to be sustainable: StanChart Sec

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JLR margins too high to be sustainable: StanChart Sec

Amit Kasat, analyst at Standard Chartered Securities spoke to CNBC-TV18 about his view of Tata Motor’s Q3 numbers.

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Amit Kasat, analyst at Standard Chartered Securities spoke to CNBC-TV18 about his view of Tata Motor 's Q3 numbers.

Below is the edited transcript. Also watch the accompanying video.

Q: Does this surprise you, this number Rs 3400 crore, is it higher than what you were expecting?

A: Yes definitely, it is higher by almost Rs 250-300 crore from my estimated numbers. So there is a positive surprise there. I have not seen the detailed numbers, but we will also have to cross check what the forex gain and loss is in the quarter.

Q: The standalone revenues have come in at Rs 13,338 crore, while the PBT for the quarter on a standalone basis has come in at Rs 186 crore. What would your preliminary assumptions be for both the standalone and the JLR numbers with whatever we have?

A: Standalone is definitely going through a pain at this point of time in terms of the operating performance. As per my estimate, passenger car business or passenger vehicle business, which was underperforming the overall sector, turned around in December and November. So, definitely that quarter is not something which is true refection of the operating performance. I think there will be margin pressure on the domestic, but the headline numbers which are there on the profit perspective, JLR numbers should be very strong in terms of margins.

Q: From what you have seen, do you think the margins will be closer to that 15% level on a consolidated basis?

A: On a consolidated basis, it should be closer to the headline numbers which are there. It should be closer to anywhere between 14-15%.

Q: JLR had revenues of about 3.7 billion pounds and we were expecting about 3.5 billion. While on the operating front, the margins for JLR have come in at 20.1%. So that's a huge bump up from what we were expecting. Your preliminary analysis?

A: I think 20% is very high margin, very difficult to digest at this point of time. So we will have to see the detailed numbers. I think the currency impact in this quarter was positive from all the fronts which helped them. The very high margin is not sustainable, to be very frank, and this shows that in consolidated profits, JLR profitability should be more than 90% in this quarter which is again very high from the numbers which you have shown.