Jaguar Land Rover to the rescue: Tata Motors shares soar as Q1 profit triples

Shares of Tata Motors Ltd, India’s biggest automaker by revenue, jumped more than 6 percent after strong sales of its luxury Jaguar and Land Rover vehicles helped triple the company’s first-quarter net profit.

Tata Motors on Monday beat forecasts as first-quarter net profit more than tripled on strong sales of its luxury Jaguar and Land Rover vehicles that continued to offset a drop in domestic sales.

Tata Motors, part of the $100 billion Tata conglomerate, said consolidated net profit for the April-June quarter rose 212 percent to Rs 5398 crore ($882.31 million) compared with Rs 1768 crore a year ago.

Analysts had expected an average profit of Rs 3710 crore.

China biggest market for Tata Motors

Earnings were bolstered thanks to the sales from Jaguar Land Rover, where profit before tax rose to 924 million (Rs 9,471 crore) on demand for the F-Type convertible and Range Rover SUVs.

JLR has reported a 30.8 percent growth in revenues year-on-year.Jaguar Land Rover wholesale and retail volumes for the quarter grew by 27.1 percent and 22 percent year-on-year to 1,15,156 units and 1,15,596 units, respectively.

EBITDA margins for JLR grew to 20.3 percent in the first quarter of the current fiscal from 16 percent in the year-ago period.

“We believe concerns on China pricing waning off is overdone and this may play out only if demand in China moderates. Range Rover and Range Rover Sport have a 6 month waiting period in China despite pricing being 2.5-3 times higher than UK levels which indicates demand in China is unlikely to cool off anytime soon,” said Kotak Securities in a research report.

The brokerage has maintained a buy on the stock as it expects JLR volume estimates to get upgraded post new launches

But while the luxury unit is helping buoy Tata Motors, while its Indian business of selling cars, buses and trucks is still struggling.

“Macro-economic environment continues to severely demand our domestic business, the management said today while announcing its results. However, with the launch of the Zest tomorrow, the company hopes to increase its volumes.

The management expects improvement in passenger vehicles from October 2014.

Company indicated that the heavy Commercial Vehicle business is turning around as truck freight rates are going up but the LCV business will take time to revive as financiers will wait before NPA levels come down in this segment to start lending aggressively.

Consolidated revenue grew 38.2 percent to Rs 64683 crore from Rs 46,796 crore in same quarter last yeardespite a continuing weak operating and economic environment in the standalone business which was more than offset by strong demand for new products, growth in volumes, richer product mix and richer geographic mix at JLR, said the company in its filing.

The company made a forex gain of Rs 94 crore as against a forex loss of Rs 174 crore in the same period a year ago.

Though the results were announced post market hours, shares of the company closed 3.3 percent higher today at Rs 447.40 on the BSE.

With inputs from Reuters