What To Expect From Tata Motors’ Q4 Results?

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Tata Motors (NYSE: TTM) will release its fourth-quarter and full year 2018 results on 23rd May (Apr-Mar fiscal year). The company’s performance for full-year 2018 is expected to be driven by an increasing domestic market sales volume for its home brand, whereas its Jaguar Land Rover (JLR) division is expected to display moderate improvement as their sales volume grew marginally throughout the year. Since the company’s Jaguar Land Rover division accounts for close to 80% of the company’s top line and more than 90% of its total valuation, an improved performance of the company’s domestic volumes is not expected to provide a significant boost to the company’s performance for the year.

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Retail sales for the company’s Jaguar Land Rover division increased marginally by 2% year-on-year (y-o-y) in FY 2018. Relatively stronger sales volume was experienced in the overseas market, whereas sales in the division’s key market of the U.K. and Europe continued to decline as a result of lower consumer confidence in diesel vehicles in these regions.

Additionally, the division’s relatively younger models such as F-Pace and Discovery Sport have also started experiencing a double-digit monthly y-o-y decline in their sales volume, depicting the negative age impact on the company’s volume sales. Although JLR’s recently launched models such as E-pace and Velar have started gaining traction, they were unable to fully compensate for the decline in volume experienced in the older models. Moderately higher sales volume in the company’s most significant division is not expected to result in significant improvement in the company’s overall performance.

On the other hand, Tata Motors’ home brand reported a significant y-o-y growth rate of 23% and 18% in its domestic and export sales volume, respectively. The company’s domestic commercial vehicle sales benefited from a favorable environment in its home country, including the government’s push towards infrastructure development and an increase in vehicle demand for e-commerce and FMCG applications, with the introduction of newer models augmenting further growth. Passenger cars and UV sales, on the other hand, benefited from increased volume sales of Tiago and Tigor, and Nexon and Hexa, as consumer demand for UV vehicles increases in the market.

Tata Motors expects to achieve a medium-term EBIT margin of 8-10% for its JLR division with better performance of newer models leading to operating leverage and higher cost efficiencies. On the domestic front, the company expects to achieve an EBIT of 6-8% through higher growth and cost efficiencies. Tata’s performance in Q4 2018 is expected to be better compared to Q3 in terms of revenues and profitability, on the back of a stronger performance with newer models and seasonality. We look forward as the company provides additional details with respect to these concerns.

 

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