Tata Motors Q1 preview: Brokerages expect massive losses on subdued volumes

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Tata Motors had posted a loss of Rs 1,197.3 crore in June quarter last year and profit of Rs 1,625.2 crore in March quarter 2019.





Tata Motors is likely to report a loss in June quarter 2019 due to subdued volumes in its domestic as well as Jaguar Land Rover businesses. The company will announce its Q1FY20 earnings on July 25.

Kotak Institutional Equities expects the maximum loss at Rs 3,551.2 crore and Motilal Oswal sees the minimum loss at Rs 1,183 crore in June quarter.

It had posted a loss of Rs 1,197.3 crore in June quarter last year and profit of Rs 1,625.2 crore in March quarter 2019.

"Tata Motors is expected to report a muted performance in Q1FY20 amid a decline in volumes in standalone operations and continuous pressure on volumes on the JLR front. Negative operating leverage will weigh on overall profitability with the company expected to report loss at the PAT level," ICICI direct said.

According to brokerages, consolidated revenue is also expected to see around 16 percent decline year-on-year with standalone (domestic) volume slipping 22 percent and JLR volumes falling around 16 percent YoY.

Kotak expects standalone revenue to decline 22 percent YoY, led by decline in volumes across segments while average selling price will be flattish YoY. It further expects standalone EBITDA margin to decline 380bps YoY to 4.2 percent in Q1 (down 180 bps QoQ) due to increase in discount levels, a weaker mix and negative operative leverage.

On JLR front, the brokerage feels average selling price will likely decline 0.5 percent QoQ due to a weaker mix.

It expects reported JLR EBITDA margin to decline 80 bps YoY as the benefit of lower hedging loss will be offset by a weaker mix, pricing pressures and negative operating leverage.

At the operating level, consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) may fall in double digits and contraction in margin in triple digits.

Key issues to watch out for would be 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.



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