Will Global Auto Market Slowdown Affect Tata Motors FY 2019 Results?

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Tata Motors (NYSE: TTM), the Indian Auto giant, is set to announce its Q4 2019 (ended March 2019) results on May 20, 2019, followed by a conference call with analysts. The market expects the company to report revenue close to $43.9 billion in FY 2019 (ended March 2019), which would be a decrease of 0.8% on a y-o-y basis. The decrease is mainly expected from Jaguar Land Rover due to the effects of the impending Brexit. Market expectation is for the company to report earnings of $0.40 per share in FY 2019 (ended March 2019), lower than $1.50 per share in the year-ago period.

 

Tata Motors reported $44.23 billion in Total Revenues in Fiscal year 2018. This included two revenue streams:

  • Jaguar Land Rover(JLR): $33.8 billion in FY 2018 (76.5% of Total Revenues). This includes revenue from passenger vehicles sold and financial services revenue from the JLR division of the company.
  • Tata Motors and other brands: $10.4 billion in FY 2018 (23.5% of Total Revenues). This includes revenue from passenger vehicles sold and financial services revenue from the domestic Tata and other brands of the company.

 

We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven Tata Motors Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019? In addition, here is more Consumer Discretionary data.

 

Key Factors Affecting Earnings:

Revenue expected in all segments:

  • Tata Motors has seen revenue fluctuate over the past quarters due to the global slowdown in the Auto industry and Brexit. We expect Q4 2019 (ended March 2019) revenue to fall compared to the same period in the previous year.
  • JLR revenue has been growing at a steady pace till now but is expected to be affected due to the uncertainty of Brexit. For FY 2019 (ended March 2019) we expect revenue to be around $34.3 billion.
  • The brand Tata has done well in the past few years and the domestic market is expected to continue expansion. For FY 2019 (ended March 2019) we expect revenue to be around $12.8 billion.

Trend in Expenses:

  • Total Expenses have moved mostly in line with Revenue except in Q3 2019 (ended December 2018) where the company recorded an impairment loss of $4 billion in Jaguar.
  • Cost of Sales has remained steady at around 63-65% of Total Revenue the last few quarters and is expected to remain the same in Q4 2019 (ended March 2019).

Full Year Outlook:

  • For the full year, we expect gross revenue to increase by 2.5% to $45.4 billion in FY 2019.
  • EBITDA margin is expected to fall to around 8.3%.

 

Trefis has a price estimate of $18 per share for Tata Motors’ stock. The value was determined after considering the uncertainty around Brexit and the expansion of its domestic brand in India and abroad.

 

 

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