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Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform! - Views on News from Equitymaster
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  • Aug 14, 2017 - Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform!

Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform!
Aug 14, 2017

Tata Motors Ltd has announced its financial results for the first quarter of the financial year 2017-18 (1QFY18). With pressure in the domestic market due to GST, the JLR business surprises again. The consolidated revenue for the quarter was down by 9.6% YoY and adjusted net profits (adjusted for one time gain) were down by 62%.

Performance summary
  • For 1QFY18, on a consolidated basis, revenue was down by % 9.6 YoY. Both the Indian and Jaguar & Land Rover (JLR) operations disappointed during the quarter. While the India business was badly impacted by GST, JLR was hurt by low volume pickup in UK and Europe.
  • On a consolidated basis, volumes were down by 2% (India - down 1%, JLR - down 2%) YoY. However, realisations were down 7.8%.
  • The disappointment in the India business was largely due to the demand shrinkage in the Commercial Vehicle segment which was severally impacted by GST. The M&HCV business was most impacted due to de-stocking and reported a de-growth of 35% YoY.
  • Even though the whole sale volumes for the JLR were down by 2.4% YoY, the retail volumes were up by 3.5% YoY. The wholesale volumes were largely impacted due to the slow pick up in UK and Europe.
  • The operating profits were more disappointing both for the India and JLR business. Operating profits for the quarters declined by 34.8% YoY with margins contracting by 321 bps to 8%. This was on the back of several reasons i.e. 1) Negative operating leverage in the domestic business; 2) Unfavourable product mix in the JLR business (phase out of high margin 'Discovery'); 3) High product development and marketing cost; 4) Hedging loss.
  • The subdued operating performance led to pressure in net profits. On a consolidated basis, adjusted net profits were down by 61% YoY.

    Consolidated Financial Performance Snapshot
    (Rs m) 1QFY17 1QFY18 Change
    No. of Vehicles sold 203,246 199,310 -1.9%
    Net sales 661,659 598,182 -9.6%
    Expenditure 585,493 548,534 -6%
    Operating profit (EBDITA) 76,166 49,648 -34.8%
    EBDITA margin (%) 12% 8% -321.15
    Other income 1,736 7,854 352.4%
    Depreciation 45,508 45,246 -0.6%
    Interest 11,785 11,089 -5.9%
    Profit before tax 20,609 1,168 -94.3%
    Exceptional Items (One Time Recovery) 4,905 36,202 638.0%
    Profit before tax 25514 37370  
    Tax 7,200 12,074 67.7%
    Profit after tax / (loss) 18,314 25,295 38.1%
    Minority Interest -240 -177 -26.4%
    Shares of Associates 4,290 6,704 56.3%
    Adj. Net Profit 18843 7318 -61.2%
    Net profit margin (%) 2.8% 1.2% -162.45
    No. of shares (m)   3,395.9  
    Diluted earnings per share (Rs)*   24.7  
    Price to earnings ratio (x)*   15.15  

    *trailing twelve-month earnings

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