Tata Motors set for earnings upgrades after Q2

JLR's operating margins up 300 bps y-o-y to 18%, unit helps company beat profit estimates

Tata Motors is India's largest automobile company, but it is the global market that has helped it earn feathers. Robust demand for Jaguar and Land Rover vehicles across the world has helped the firm shrug off the abysmal performance at home even in the second quarter. Strong growth in Jaguar Land Rover's (JLR) sales has helped Tata Motors report a 70 per cent year-on-year (y-o-y) growth in net profit to Rs 3,542 crore. The Street was expecting the company to report a net profit of Rs 3,200 crore but the firm has beaten estimates due to a sharp uptick in JLR's margins.

Tata Motors has stunned the Street with a 300-basis point y-o-y jump in JLR's operating margin to 17.8 per cent. Tata Motor's consolidated operating margins came in at 16 per cent as a result of this, as the domestic margins are at two per cent, down from 5.9 per cent in the year-ago period. After the second quarter numbers, analysts believe Tata Motors is due for an upgrade as JLR is trading at attractive valuations, compared to other global luxury carmakers. Yaresh Kothari of Angel Broking says 17.8 per cent is the highest-ever clocked by JLR after Tata Motors took over the company.

In the second quarter, Jaguar Land Rover's wholesale and retail volumes grew by 31 per cent (101,931 units) and 21 per cent (102,644), respectively, compared to the corresponding quarter last year. Jaguar's retail volumes grew by 91.6 per cent y-o-y and retail grew by 56.5 per cent. Land Rover's wholesale and retail volumes grew 23 per cent and 15 per cent over the corresponding quarter last year. Analysts say the launch of the smaller engines has also helped aid the company's growth. The strong demand for JLR vehicles has given the firm pricing power, too.

Thanks to the popularity of its new launches, Jaguar Land Rover is growing way ahead of other global luxury car makers this year. After the spectacular success of Evoque, the new Range Rover, Range Rover Sport and Jaguar F-TYPE has done exceedingly well. China continues to grow and is the largest market for JLR. The demand for JLR's new products has pushed up not only volumes but also profitability. Jaguar Land Rover reported a 69 per cent jump in its operating profit. Going by the pipeline of products for the next two years, analysts say the company's earnings are set for an upgrade.