Tata Motors Q1 preview: Muted performance seen amid decline in volumes

Tata Motors is scheduled to announce its June quarter earnings on Thursday, and analysts expect the decrease in volume across all segments to impact both the company's revenue and bottom-line. They see a 28-30 per cent year-on-year (y-o-y) fall in net profit and 13-16 per cent dip in revenue for the period under review.


The company's performance may be impacted by the multiple headwinds faced by the entire Indian auto sector. While the weakness in overall consumer demand and funding related issues are likely to impact sales, earnings before interest, tax, depreciation and amortisation (EBITDA) margin is likely to be influenced by lower operating leverage and intensive competition leading to higher discounts.


"Tata Motors is expected to report a muted performance in Q1FY20E amid a decline in volumes in standalone operations (1.37 lakh units, down 22 per cent YoY) and continuous pressure on volumes on the JLR front (1.1 lakh units, down 16 per cent YoY)," ICICI Direct said in a report.


Edelweiss sees Tata Motors' consolidated adjusted Q1 loss at Rs 1,102.2 crore, a 28.9 per cent year-on-year (YoY) decline as compared to the Rs 855.3 crore loss it had posted in the year-ago quarter. On a sequential basis, the company's loss may expand by more than 150 per cent. 


ICICI Direct sees a higher loss of Rs 1,420 crore for the period. "Negative operating leverage will weigh on overall profitability with the company expected to report loss at the PAT level to the tune of Rs 1,420 crore," the brokerage firm said in a result preview note. 


Consolidated revenue, too, may fall 13 per cent to Rs 58,217.3 crore as compared to Rs 66,701.1 crore in the year-ago period due to weakness in India and the JLR business, analysts at Edelweiss said.


As per Prabhudas Liladher, operating income / EBITDA, for the quarter may stand at Rs 4,226.3 crore, a 29.6 per cent dip from Rs 6,001 crore in the year-ago period.


"Standalone margins to shrink about 120 basis points to 7.8 per cent, on account of unfavourbale product mix and higher discounting in the industry," analysts at the brokerage firm said.


Investors, analysts say, should focus on the current demand trends for JLR and outlook for key markets, update on cost-cutting initiatives at JLR, demand trend in domestic markets and new product launch, and impact of forex hedge loss.


At the bourses, Tata Motor's stock has underperformed the benchmark S&P BSE Sensex. The stock has dipped 6.7 per cent during the June quarter of FY20 as against 1.86 per cent rise in the Sensex during the same period.