Tata Motors Q2 PAT seen up 54% on JLR performance: Poll

India's largest commercial vehicle maker Tata Motors will announce its second quarter (July-September) earnings on Friday. According to a CNBC-TV18 poll, analysts expect strong results on a consolidated basis led by a drastic improvement in Jaguar Land Rover (JLR) operational performance.

However, they feel standalone business (domestic business) will continue to report huge losses and a big crack in margins during second quarter.
Consolidated profit after tax is expected to register 54 percent growth year-on-year to Rs 3,200 crore and revenues may grow 26 percent Y-o-Y to Rs 54,960 crore in the quarter gone by.
During the same period, earnings before interest, tax, depreciation and amortisation (EBITDA) is likely to jump 44 percent to Rs 7,712 crore and operating profit margin may expand 180 basis points to 14 percent. Jagaur Land Rover
JLR, which was acquired by Tata Motors for USD 2.3 billion from Ford Motor Company in 2008, continued to support the financials of Tata Group company.
Profit after tax may increase 26 percent Y-o-Y to GBP 386 million and revenues may jump 39 percent Y-o-Y to GBP 4,603 million in three-month period ended September 2013, led by strong sales.
During the same period, EBITDA is likely to grow 58 percent to GBP 770 million and operating profit margin is expected to expand 190 basis points to 16.7 percent during September quarter.
Total sales volumes grew 30.7 percent on yearly basis (up 10 percent on sequential basis) to 1.01 lakh units in July-September period, driven by strong demand for Jaguars new variants - F type and new Range Rover.
Jaguar sales volumes increased 99 percent Y-o-Y to 19,570 units while Land Rover volumes surged 21 percent to 81,649 units.
Geography wise both US and China (accounts for 45 percent of JLR volumes) showed good improvement during second quarter. Also proportion of China in total volume climbed to 24.3 percent in September quarter from 21.6 percent in June quarter, which will lead to positive operating leverage, feel analysts.
According to a poll, margins may be impacted slightly on sequential basis due to forex. GBP appreciated around 1.5 percent in Q2 and JLR has net 40 percent export exposure in this currency.
Some incentives were given to customers as JLR was required to clear out inventory of old RR sport, which also could hamper margins marginally. Standalone business
Analysts feel standalone business should continue to remain a big drag for the company. Operating profit margin may drop significantly to around 1 percent in September quarter from 5.2 percent in a year ago period and EBITDA may fall 86 percent year-on-year to Rs 90 crore.
During the same period, Tata Motors is expected to report a net loss of Rs 600 crore on a standalone basis as against profit of Rs 867 crore and revenues may decline 30 percent Y-o-Y to Rs 8,670 crore.
Standalone business further deteriorated in second quarter of current financial year 2013-14. Total sales volumes slipped 31.5 percent Y-o-Y to 1.51 lakh units.
Medium and heavy commercial vehicle sales fell 33 percent Y-o-Y and passenger vehicle sales declined 48 percent Y-o-Y while light commercial vehicle sales also continued to decline by 19 percent. Stock Performance
The stock gained 35 percent since August 1 and touched a record high of Rs 400.9 on November 5.
Tata Motors is the top pick of most brokerage houses in this earnings season. Most brokerages raised FY14-16 earnings growth estimates after strong response to new launches - Jaguar Ftype, new RR and RR sport, and improvement in China market seen in last three months.
Thus analysts say the company has to surprise on JLR margins for the stock to build on gains from hereon. If JLR margin is more than 17.5 percent during September quarter then that would be construed as a big surprise.