Tata Motors Q2 Results Preview: Brokerages see 14% drop in revenue, Rs 4,000-crore net loss

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India’s one of the oldest automobile company, Tata Motors Ltd, will announce its results for the second quarter of this financial year today. Even though its domestic business has started looking up on the back of new products and push for electric vehicles, the global shortage of semi-conductor chips is going to severely impact the volumes of Jaguar Land Rover (JLR) which, in turn, will take a toll on the company’s bottomline.

Experts are of the opinion that this quarter volumes of the standalone entity will increase by 55 percent year-on-year and the average standalone realisations will improve 21-25 percent YoY. This should result in an increase in standalone revenues by about 90 percent. On the other hand, JLR volumes are expected to decline 14 percent, resulting in a 13 percent decline in GBP revenues.

Consolidated revenues are expected to improve 10-14 percent on a year-on-year basis.

It may be noted that the company had reported consolidated revenues of Rs 53,530 crore and a net loss of Rs 314 crore in the same period last year. Its consolidated revenues stood at Rs 66,406 crore with a net loss of Rs 4,451 crore in the previous quarter of this financial year.

Kotak Institutional Equities expect the net sales for the company to witness an on-year increase of 7.8 percent to Rs 57,720 crore. “We estimate standalone business revenues to increase by 88 percent YoY in this quarter led by a 55 percent YoY increase in volumes and a 21 percent YoY increase in Average Selling Prices (ASPs),” the brokerage said in a report.

It expects the JLR volumes to decline 12 percent on-year due to chip shortage in this quarter because of which revenues (ex-China JV) are expected to decline by 13 percent over the last year-ago period.

Kotak Institutional Equities expects the consolidated EBITDA to decline significantly by 39 percent on an annualised basis to Rs 3,469 crore from Rs 5,665 crore last year and by 34 percent on a quarterly basis from Rs 5,258 crore. It expects the standalone EBITDA margin to improve 5 percent in this quarter from 0.8 percent in the previous quarter primarily led by operating leverage benefits and cost mitigation, partly offset by raw material headwinds.

The brokerage expect the EBITDA margin for JLR to decline 260 bps quarter-on-quarter to 6.4 percent due to a steep decline in volumes in this quarter. “We expect the JLR EBIT margin to come in at negative 5.8 percent in this quarter,” it said.

At the PAT level, the brokerage expects the company to report a loss of Rs 4,330 crore against a loss of Rs 314 crore last year and a loss of Rs 4,451 crore in the last quarter.

“The India business continues to see strong traction in PV volumes, whereas CV business benefits from cyclical recovery and market share gains,” said Motilal Oswal. It expects the JLR volumes to decline 14 percent and standalone volumes to rise 55 percent and domestic ASPs to increase by 25 percent.

The brokerage estimates the consolidated revenues to clock an increase of 14.3 percent from last year to Rs 61,166 crore in this quarter. It expects an EBITDA of Rs 4,366 crore which is a decline of 23 percent from Rs 5,665 crore reported last year. The previous quarter EBITDA stood at Rs 5.258 crore. EBITDA margins are expected to decline 350 bps on-year to 7.1 percent and by 80 bps QoQ.

The reported net loss, according to Motilal Oswal, would be around Rs 2,952 crore and adjusted net loss would be Rs 3,146 crore.

Emkay Research expects consolidated sales of Rs 60,819 crore which is an on-year increase of 13.6 percent and an on-quarter decline of 8.4 percent. An EBITDA of Rs 3,607 crore is expected in this quarter which is a 36.3 percent decline on an annualised basis and a 31.4 percent decline on a quarterly basis.

“JLR’s GBP revenue is likely to fall 13 percent on-year to £3.8 billion, due to lower volumes (-15 percent). EBITDA margins should contract 590bps to 5.2 percent, due to negative operating leverage and the absence of furlough benefits”.

It further expects standalone revenues to grow strongly by 94 percent, driven by higher volumes (55 percent) and realisation (25 percent). The brokerage expects the overall EBITDA margins to contract 465bps to 5.9 percent in this quarter compared to last year and by 200 bps on a quarterly basis.

It expects the company to report a net loss of Rs 4,416 crore in this quarter.

ICICI Securities is of the opinion that the company is expected to report weak results this quarter tracking a sequential decline in volumes at JLR operations due to global semiconductor shortages.

“JLR wholesale volumes (including China JV) are expected to have declined 33 percent QoQ to 65,000 units while India CV, PV segments posted sequential growth of 73 percent QoQ (to 86,887 units), 31 percent QoQ (to 84,384 units), respectively,” it said.

The brokerage expect consolidated net sales to decline 16 percent on-quarter to Rs 55,140 crore. Consolidated EBITDA margins are seen declining 340 bps QoQ to 7.6 percent with JLR margins seen declining 200 bps QoQ to 7 percent. “We expect Tata Motors to post consolidated loss of Rs 4,092 crore in this quarter,” it  said.

The stock closed at Rs 483.70 on Friday – up Rs 2.65 from its previous days close. The stock has seen a great run-up in the past one year and has risen 267 percent from its year-before levels. It has generated returns of 163 percent in this financial year, 65 percent in the past three months and 46 percent in the last one month.