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Tata Motors to announce Q3 earnings today; key things to watch out for

Tata Motors is likely to see a fall in revenue, however, there may be signs of improvement in EBITDA margin, thanks to sequential improvement in the company's India business.

January 30, 2020 / 09:51 AM IST
Representative Image

Representative Image

The October-December quarter could be another tough quarter for the automobile companies on account of weak economic growth, falling demand and technological as well as regulatory shift.

A heavyweight from the sector, Tata Motors, is likely to see a fall in revenue, however, there may be signs of improvement in EBITDA margins, thanks to sequential improvement in the company's India business, say industry experts and brokerages.

Brokerage firm Motilal Oswal Financial Services is hopeful that the company's India business will witness quarter-on-quarter (QoQ) recovery in volumes which will help improve the company's sequential margins.

Motilal also believes that JLR product and market mix improvement will reflect from Q3.

Motilal Oswal's estimates show a 3.6 percent year-on-year (YoY) decline in the company's consolidated net operating income to Rs 74,144 crore. The EBITDA margin percentage may come in at 11.7 percent while JLR's Ebitda margins are expected to be at 13.2 percent.

The brokerage said Tata Motors' PAT may be to the tune of Rs 1,458.3 crore for Q3FY20. The company had reported a loss of Rs 26,823.2 crore in Q3FY19.

Brokerage firm Sharekhan by BNP Paribas expects consolidated revenue of Tata Motors to decline 7 percent year-on-year (YoY) while Jaguar Land Rover revenue is likely to be flat while that of the Indian operations is expected to drop 22 percent YoY.

Besides, the brokerage estimates that the consolidated profit may fall by 58 percent YoY due to increased depreciation expenses. Also, payment of taxes, as compared to a tax credit in the corresponding quarter last year, would affect profitability, said Sharekhan.

"Operating profit margin (OPM), however, is expected to improve 330 bps YoY. JLR margins are expected to improve 520 bps YoY driven by cost control measures and low margins base of the corresponding quarter last year. The standalone margins are expected to fall 420 bps YoY due to negative operating leverage," said Sharekhan.

Brokerage firm Edelweiss Securities expects consolidated revenue to fall 1.1 percent YoY to Rs 76,108.1 crore due to weakness in the India business primarily. But, Edelweiss expects consolidated operating margin to improve by 180 bps.

Kotak Securities expects standalone revenues to decline by 24 percent YoY led by a 25 percent YoY decline in volumes across segments.

"Net sales can see a 2.4 percent YoY decline to Rs 75,071.2 crore, but EBITDA margin is likely to improve 350 bps YoY," Kotak said.

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Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.

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first published: Jan 30, 2020 09:51 am