Negative operating leverage and weakness in the medium and heavy commercial vehicle market are the primary causes for Tata Motors to report a decline in standalone revenue and earnings, HSBC global Research said in a post-earnings note.
Global sales of Jaguar and Land Rover (JLR), excluding the Evoque, fell 9.4 percent on year, it said. JLR margins were further affected by forex losses and high tax burden. China, however, is the largest market for the JLR segment accounting for around 22 percent of JLR sales.
In China JLR growth may slow down a little in anticipation of new models of the Range Rover. Earnings may also be impacted due to increase in discounts and incentives on the Range Rover and Jaguar in response to the competition from Mercedes. There is a shift in demand for lower end models in the other side of the globe as macro headwinds remain high.
JLR’s product cycle is expected to be intact in the long term due to the introduction of new products and favorable product mix and currency movement.
However, medium-term forecasts for JLR and M-HCV segment remain muted. The company has ongoing aggressive internal cost reduction strategy to support margins going forward.
The current market price is Rs 231.9 showing a growth of 45.56 percent vis a vis the sensex benchmark index which showed only a marginal growth of 4.20 percent.