Tata Motors Result Preview

India's largest commercial vehicle maker Tata Motors  will report its fourth quarter results later on Wednesday, amid what has been a continued slump in the domestic business, and no signs yet of any pick up in demand for trucks as well as passenger cars. Its consolidated operating margins, meanwhile, are expected to see a pickup, driven by strong demand for the new Range Rover and good response to Jaguar's XF and XJ models in the global markets. Overall, analysts expect Tata Motors consolidated net profit to decline 52 percent year-on-year to Rs 2,990 crore. Its British luxury Jaguar Land Rover unit had a large one-off tax writeback of GBP 166 million, in the year ago quarter. Revenue is likely to increase 4 percent to Rs 53,000 crore, according to a CNBC-TV18 poll. Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) is seen up 8 percent to Rs 7,245 crore, while operating profit margin will expand to 13.6 percent from 13.3 percent. JLR is likely to report a net profit of GBP 399 million, with revenue rising 17 percent to GBP 4.87 billion. EBITDA is seen up 21 percent to GBP 735 million, while operating profit margin will expand 60 bps to 15.2 percent, helped by an increase in average selling price. However, some analysts feel JLR could also surprise negatively if there is a higher of lower margin products like the Evoque, Freelander and higher fixed costs for new Jaguar launches and new Range Rover assembly line at Solihull.

STANDALONE EARNINGS

Despite strong sales growth at JLR, its the standalone business, that has been a worry for several quarters now and things are unlikely to have improved in the fourth quarter, sales for both CVs and PVs remain sluggish. On an average, analysts expect Tata Motors' primarily domestic operations to report a loss of Rs 514 crore, versus a profit of Rs 565 crore, a year ago. Revenue likely tumbled 35 percent to Rs 10,640 crore. CV sales, especially medium and heavy trucks, declined 43 percent year-on-year, despite record high discounts and inventory levels are still at 6-7 weeks. Passenger car sales are down 67 percent year-on-year.

STOCK WATCH

Ahead of results, Tata Motors shares were up 1.1 percent at 163.60 on NSE in morning trade. The stock is down near 7 percent since Dec-end, underperforming the wider Nifty, which is up 3.5 percent over the same period. Outlook on domestic demand, especially, CVs, JLR demand trends and FY14 sale outlook, especially in China and the US markets, new Range Rover order book, update on Range Rover Sport and other launches, will be key factors to watch, said HDFC Securities. Many brokerages are still bullish on Tata Motors; Credit Suisse expect it to "outperform" and Goldman Sachs advises a "buy." "We believe JLR's performance will continue to drive Tata Motors' stock, as it contributes 75 percent of company's revenue and 90 percent of its profit," Brics Securities, said, putting a "add" rating to the stock.