The disappointing Q3 earnings of Tata Motors did not go well with the markets. The stock declined 10.3 per cent a day after the results were announced, the second highest fall over the last five years, on a daily basis. It witnessed the steepest fall of 11.8 per cent on May 30, 2012.
Per cent change over the previous day
The devil is in the details. On a consolidated basis, the company's net profit plunged over 90 per cent to Rs 112 in Q3 FY17 from Rs 2,953 in Q3 FY16. Its net revenues too slipped 4.4 per cent over the period to Rs 67,484 crore. This was primarily on the account of operational weakness in Jaguar Land Rover (JLR) coupled with higher losses in domestic weakness.
Its British luxury car unit's operating profit margin declined first time to single digits of 9.3 per cent in the December quarter. It was 5.1 percentage points lower from the corresponding quarter previous year. The operating profit margin was adversely impacted due to less favourable product mix, lower wholesale JLR volumes, higher variable marketing expense, new model launch costs and pay negotiations. JLR reported 5 per cent year-on-year (y-o-y) volume decline, mainly on account of discovery run out. According to Rohan Korde, Research Analyst, Prabhudas Liladher, as the company has new launches planned in the next year, its EBITDA margins is expected to be in the current range for the next year.
However, there was some improvements on a sequential basis.
In '000 units
The company's standalone business managed to maintain its positive earnings before interest, tax, depreciation and amortisation (EBITDA) for a eight consecutive quarter and posted EBITDA margins of 1.5 per cent. The commercial vehicles segment witnessed demand shrinkage in the months of November and December 2016, on account of the impact of demonetisation. Its volumes declined by 4.1 per cent y-o-y in Q3 FY 17. It's medium and heavy commercial vehicle segment declined by 9.0 cent y-o-y. "Outlook for FY18 and Q4 FY17 is expected to be positive on account of pre?buying before BS IV adherence and infrastructure focus. M&HCVs are also expected to grow in Q4," adds Korde.