Tata Motors Ltd.|Q2FY15 Result Update | CMP : Rs.524 | Rating : NR | Below street expectation; higher depreciation and tax rate dented bottom line :: IndiaNivesh

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Below street expectation; higher depreciation and tax rate
dented bottom line
Tata Motors reported Q2FY15 consolidated PAT below street expectation on the
back of weak performance from domestic business. Reported consolidated net profit
fell 7% YoY and 39% QoQ to Rs. 32.9 bn due to higher depreciation and higher tax
provision mainly from JLR front. However, consolidated Adjusted PAT stood at Rs.
30.46 bn (below consensus of Rs. 46.8 bn). Consolidated revenue grew 8% YoY
(down 6% QoQ) to Rs. 601bn vs consensus of Rs 637 bn on the back of increase in
average consolidated realization despite 21% YoY de-growth in consolidated
volumes. Average consolidated realization improved by 37% YoY and 6% QoQ to Rs
30,24,091 due to higher JLR volume. Consolidated EBITDA margin expanded by 59
bps YoY (down 143 bps QoQ) to 15.8% led by margin expansion by JLR. JLR registered
revenues of GBP 4.8 bn up by 4% YoY however net profit stood at GBP 450 mn
down by 11% YoY due to higher depreciation and higher effective tax rate.
On Standalone front company showed some signs of recovery, however, the subdued
infrastructure and manufacturing activities, high interest rate regime continued to
impact the operations during the quarter. Revenue de-grew by 1% YoY (up 14%
QoQ) to Rs. 86.57 bn led by lower volume. Standalone EBITDA margins stood
negative in Q2FY15, impacted by higher raw material cost, higher employee cost
and marketing cost. Reported net loss stood at Rs. 18.45 bn (vs loss of Rs 8.03 bn in
Q2FY14) on the back of lower EBITDA and higher depreciation. Depreciation
increased by 18% YoY and 13% QoQ to Rs 6.1 bn however; other income increased
by 87% YoY to Rs 1.42 bn. Other income includes Rs 747 mn received from subsidiary
companies as dividend. We maintain cautious view on the stock due to higher
dependency on China’s market. Recently JLR has slashed prices for two Range Rover
sport-utility vehicles and a Jaguar sports car by up to 19% in China amid increased
scrutiny by the Chinese government of foreign car makers’ pricing policies. China
contributes for 35% of JLR’s net profit (FY14). We believe the price reductions will
have significant impact on the profitability of JLR’s China operations.

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