Tata Motors Q4 preview: Analysts expect low volumes to drag earnings

Tata Motors Ltd, India’s largest automaker by sales revenue, will report its March quarter (Q4 FY19) results on Monday amid expectations that dip in volumes may drag the company's consolidated revenues and earnings.

"Update on China business will be key," analysts said.

According to Reliance Securities, Tata Motors' standalone volume is expected to fall by 6 per cent on a year-on-year (YoY) basis, while Jaguar Land Rover (JLR) volume is expected to fall by 12 per cent YoY. 

The brokerage expects consolidated revenue to dip 1.8 per cent at Rs 89,643 crore. The company had posted Rs 91,279.1 crore as revenue in the year-ago period. In terms of profit, analysts see a whopping 58 per cent decline to Rs 1,198.3 crore on a YoY basis compared to Q4FY18's profit of Rs 2,860.1 crre.

Earnings before interest, tax, depreciation, amortisation (EBITDA) in Q4 FY19 is expected at Rs 8,449 crore while EBITDA margins is seen at 9.5 per cent, down 245 basis points (bps) YoY.

Kotak Institutional Equities expects the company's consolidated revenue to fall even more, 11.3 per cent, at Rs 80,936.5 crore on a YoY basis while Tata Motors' standalone revenue is expected to decline by 7 per cent on a YoY basis due to decline in volume and marginal decline in average selling price (ASPs).

The brokerage expects Tata Motors to report a consolidated profit of Rs 359.1 crore, an 83.1 per cent decline from a year-ago period. EBITDA may come in at Rs 7,788.1, a 28.5 per cent YoY dip as compared to Rs 10,894.4 crore in the year-ago period and the EBITDA margin at 9.6 per cent, down 232 bps from the year-ago period.

As for JLR, analysts at Kotak Institutional Equities said "JLR's UK P&L (profit and loss) volumes will likely decline by 14 per cent YoY (assuming 48,500 wholesale volumes in March 2019). We expect ASPs to decline by 1 per cent as benefit of GBP (Great Britain Pound) depreciation will likely be offset by weaker regional mix (lower China volumes). We expect reported EBITDA margin to deteriorate by 310 bps yoy due to lower gross margins and high employee cost."

Edelweiiss expects the company to report a 8 per cent YoY dip in consolidated revenue growth at Rs 84,197.3 crore, primarily due to weakness in India business, while EBITDA may slump 18.1 per cent YoY at Rs 8,925.3 crore.

"We expect consolidated operating margins to improve sequentially by 250bps to 10.4 per cent, due to an improvement in JLR’s businesses (lower employee cost being one of them)," analysts at Edelweiss said.