Tata Motors Posts Better Numbers For Q3FY14

Indian auto major, Tata Motors (TML) reported good set of number for the third quarter results. The company posted a handsome growth of 195% in its Q3FY14 net profit over same period last year. However, the net profit included one time income from disinvestment of its Singapore subsidiary, TML Holdings Pte, amounting to Rs 1948 crore in Q3FY14.

TML reported consolidated revenue of Rs 63877 crore for Q3FY14 against Rs 46089 crore in Q3FY13, showing a robust growth of 38.6% growth during the quarter. The strong growth in its revenue was due to to strong demand, growth in volumes and favourable product & geographical mix at Jaguar Land Rover (JLR). For JLR both the wholesale and retail volumes for Q3FY14 grew by 22.7% and 26.5%respectively over the corresponding period last year. The growth in JLR volumes was driven by re-launch of some of existing models and launch of new models in the market.

However, on the domestic front, the commercial and passenger vehicles volumes was down by 35.7% compared to corresponding period last year. The subdued economic activity, weak consumer sentiments, higher interest rates, weak liquidity, lower fleet utilisation and stagnant freight rates were the main reasons for the decrease in volumes in domestic markets. Despite lower volumes, TML's market share in M&HCV increased by 200 basis points on yearly basis during Q3FY14, due to value added services and new launches by the company in M&HCV segment.

TML's consolidated EBITDA increased by more than 75% to Rs 9949 crore in Q3FY14 against Rs 5656 crore, due to lower percentage of total expenses as a sales during Q3FY14 against the same in Q3FY13. This increased realisation translated into the expansion of its EBITDA margins by 330 basis points to 15.58% in Q3FY14. The company continued with its capital expenditure which can be substantiated by the 38% increase in its depreciation cost on yearly basis during reported quarter.

TML's consolidated PAT boosted to Rs 4820 crore for Q3FY14 against Rs 1634 crore in Q3FY13. However, this PAT for Q3FY14 included one time income Rs 1948 crore from disinvestment of its Singapore subsidiary. Excluding this extraordinary item also, its PAT showed a robust growth of 75.8% growth to Rs 2872 crore in Q3FY14 on yearly basis. Further, excluding this one-off, TML's consolidated PAT margin expanded by 50 basis points to 4.50% in Q3FY14 against 3.55% in Q3FY13.

TML's other subsidiary, Tata Daewoo also registered satisfactory results during the reported quarter. The net profit of the company increased to KRW 5 billion in Q3FY14 from KRW 0.3 billion in the corresponding period last year. the TML's financing subsidiary, Tata Motors Finance registered a loss of  Rs 1 crore in Q3FY14 against profit of Rs 84 crore in Q3FY13. However, the loss was majorly due to difficult situation that the financial market, stress in business environment and consequent higher provisions on account of Non Performing Assets.

Despite of domestic market weakness, the JLR's performance improvement in the market may re-rate TML. Further, early signs of revival in domestic market will further re-rate the company and one can expect good appreciation in the stock going forward. However, we recommend our readers to wait for couple of quarters for the signs of economic revival before having exposure in this stock.