Tata Motors Q2 net up 71%, JLR margin expands 300 bps

Revenues increased 31.1 percent year-on-year to Rs 56,882 crore in three-month period ended September 2013.

According to a CNBC-TV18 poll, analysts had expected the Tata group-owned company to report net profit of Rs 3,200 crore on revenues of Rs 54,960 crore for the quarter.

During the same period, consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) 62 percent year-on-year to Rs 8,635 crore operating profit margin expanded 300 basis points to 15.2 percent. It reported a forex loss of Rs 72 crore during September quarter as against gain of Rs 15.3 crore in a year ago period.

Standalone business (which includes commercial and passenger vehicles) remained weak for another quarter, posting a loss of Rs 803.5 crore for the quarter ended September 2013 as against loss of Rs 867 crore in a year ago period. The loss was higher compared to analysts' expectations of Rs 600 crore.

"Continued slowdown in economic activity, low level of transport freight and infrastructure activity, frequent diesel price increases and tight financing environment, have impacted the industry during the quarter," the company explained reason behind weak performance of its standalone business.

Commercial vehicle business will remain under stress due to economic condition, company said at a press conference.

Operating profit margin of the standalone business stood at 2 percent, impacted by competitive pressures on pricing in certain segments.

Total sales volume of commercial vehicle space in the quarter stood at 1.5 lakh units, a decline of 32.5 percent compared to corresponding quarter of last fiscal.

Jaguar Land Rover (JLR)

JLR, which was acquired by Tata Motors in June 2008 from Ford Motor Company for USD 2.3 billion, continued to boost consolidated profits of the company.

Net profit grew a whopping 66.2 percent year-on-year to £ 507 million and revenue jumped 40.3 percent Y-o-Y to £ 4,612 million in the quarter gone by, which both were ahead of analysts' expectations of £ 386 million and £ 4,603 million, respectively.

Margin was far better than the street forecast at 17.8 percent for the quarter ended September 2013, a growth of 300 basis points compared to a year ago period. EBITDA spiked over 69 percent Y-o-Y to £ 823 million during the same period.

"Strong growth in revenues and operational performance was supported by increase in wholesale volume, richer product mix, launch of new Range Rover Sport, new Range Rover and Jaguar F-TYPE," the company reasoned.

US and China (accounting for 45 percent of JLR volumes) markets saw good demand in the quarter gone by. In fact, proportion of China in total volume has gone up to 24.3 percent in September from 21.6 percent in June quarter.

After such a stellar performance (especially margin), analysts expect more earnings upgrades.

Rikesh Parikh, VP institution corporate broking at Motilal Oswal Securities expects JLR performance to remain strong led by product actions and continued growth in emerging markets, particularly China.

"Domestic business could bounce back strongly along with economic recovery, though we have not factored this in, given limited visibility," he adds.

JLR wholesale and retail sales volumes grew 31.6 percent and 21.1 percent Y-o-Y to 1,01,931 lakh units and 1,02,644 lakh units during September quarter, respectively.

Shares of Tata Motors, which surged 38 percent in last three months, closed at Rs 385 on Friday, up 1.29 percent from previous close on the BSE. Numbers were announced after market hours.