Tata Motors Q2 Outlook: Mixed Results with 4.7% Revenue Drop and 5% Passenger Vehicle Decline

Tata Motors is expected to report a 4.7% decline in Q2 revenue, driven by weaker demand in passenger and commercial vehicles. Analysts predict mixed results, with a slight increase in net profit but concerns over Jaguar Land Rover’s weak sales and rising discounts. The company’s India business faces a 5% drop in passenger vehicle volumes and a 19% decline in commercial vehicle sales year-on-year.

CONTENTS

• Tata Motors faces revenue decline.
• Tata Motors’ shares decline ahead.
• Tata Motors faces mixed Q2 outlook.

Tata Motors Q2 Outlook: Mixed Results with 4.7% Revenue Drop and 5% Passenger Vehicle Decline

Tata Motors faces revenue decline

Tata Motors Q2 Outlook: Mixed Results with 4.7% Tata Motors is expected to report a decline in revenue for Q2 due to weaker demand in both passenger and commercial vehicles. The company has also faced challenges with Jaguar Land Rover (JLR) demand and supply issues. Analysts predict a 4% year-on-year drop in consolidated revenue, driven by lower volumes in JLR, passenger vehicles (PV), and commercial vehicles (CV).

However, the EBITDA margin is likely to expand slightly by around 8 basis points to 13.1%, helped by a better model and regional mix at JLR compared to last year. JLR’s revenue is expected to decrease by 6% year-on-year, with its EBITDA margin contracting due to higher incentivization affecting gross margins. Analysts are particularly focused on the demand outlook for all vehicle segments, with PV and CV volumes in India declining 5% and 19% year-on-year, respectively. The commercial vehicle margin is likely to remain stable, while JLR’s volume is anticipated to drop 4% year-on-year due to ongoing supply challenges.

Tata Motors’ shares decline ahead

Tata Motors Q2 Outlook: Mixed Results with 4.7% Tata Motors’ shares have fallen by nearly 1% ahead of its Q2 results, with analysts anticipating a mixed performance. Sharekhan expects a 25% year-on-year increase in net profit, forecasting a profit of Rs 4,807 crore compared to Rs 3,845 crore last year, though it predicts a 3.9% decline in sales to Rs 1,01,070 crore.

On the other hand, PL Capital anticipates a 28.4% rise in adjusted net profit to Rs 4,990 crore, with a 2.9% increase in sales to Rs 1,08,171 crore. Elara Securities expects the highest profit growth, projecting a 42% rise to Rs 5,352 crore, with a slight 1.1% increase in sales.

Analysts are closely monitoring the management’s commentary on high levels of passenger vehicle (PV) inventory, increased discounts, and the outlook for festive demand. Additionally, BNP Paribas raised concerns about potential challenges due to lower wholesale volumes at Jaguar Land Rover (JLR), suggesting that Tata Motors could face negative surprises. The company’s guidance for JLR’s full-year performance could also be at risk, given global weakening auto demand and recent cuts in guidance by industry peers.

Tata Motors faces mixed Q2 outlook

Tata Motors Q2 Outlook: Mixed Results with 4.7% Tata Motors’ share price is under scrutiny ahead of its Q2 results announcement today. The stock has dropped by over 11% in the past month, largely due to a broader market correction, and was down around 1% in morning trading. Analysts expect mixed results for the company’s Q2 performance.

The commercial vehicle segment is anticipated to show subdued demand, while passenger vehicle growth is expected to be moderate, raising concerns. Rising discounts amid soft demand and a build-up of channel inventory for festive sales may provide some relief. Favorable commodity prices and an improved model mix in passenger vehicles could also offer some support. However, Jaguar Land Rover sales are expected to be weak due to ongoing supply issues.

For Tata Motors’ India business, analysts at Motilal Oswal Financial Services (MOFSL) forecast a 5% decline in passenger vehicle volumes and a 19% drop in commercial vehicle volumes year-on-year. The commercial vehicle EBIT margin is expected to remain flat at 7.8%, while the passenger vehicle EBIT margin may contract to -0.9% due to rising discounts. Jaguar Land Rover volumes are projected to decline by 4%, with an EBIT margin of 6.8%, down 50 basis points sequentially.

At the consolidated level, MOFSL expects a 4.7% year-on-year decline in net operating income to ₹1,00,180 crore. EBITDA is expected to fall slightly from ₹13,720 crore to ₹13,260 crore, while EBITDA margins are forecast to remain stable at around 13.2%. Net profit is estimated to rise to ₹4,240 crore, up from ₹3,780 crore a year ago but lower than the previous quarter’s ₹5,560 crore.

In contrast, Elara Securities expects a higher net profit of ₹5,353 crore, only slightly lower than the previous quarter but a significant improvement compared to last year’s Q2. Analysts at Elara noted that Tata Motors has outperformed most other OEMs in the passenger vehicle segment with a slight sequential increase in average selling price (ASP).