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Robust demand for passenger and commercial vehicles in India, growth in volumes for JLR, easing raw material costs, a richer product mix, and operating leverage benefits are likely to drive high double-digit growth in earnings.
Besides watching out the third quarter performance, investors and analysts will focus on the outlook for both India and international markets. They will also eye JLR’s guidance for margin growth and free cash flow generation.
Core Earnings
Consolidated net profit of the automaker is seen surging a whopping 55% year-on-year (YoY) to Rs 4,589 crore, according to the average of estimates given by five brokerage houses.
Consolidated topline is seen rising 21% YoY to Rs 1.07 lakh crore, and operating profit may grow 50% to Rs 14,422 crore, the estimates showed.
Sequentially, the net profit is likely to rise 19%, whereas both revenue and operating profit may see a moderate growth of 2% and 5%, respectively, amid weak volumes on a quarter-on-quarter basis.
India Show
Kotak Institutional Equities expects a 11% YoY growth in standalone revenue, led by a 1% improvement in volumes due to strong demand trends in M&HCV trucks and passenger segment and a 10% increases in average selling price due to richer product mix and price hikes taken over the last one year.Operating performance is also likely to improve with a richer product mix amid higher share of SUV in the passenger vehicle segment.
With an improving mix, strong execution of demand-pull strategy, digital offerings, Tata Motors aims to sustain the growth momentum in the commercial vehicle segment, and step up volumes in the passenger car segment through new generation product launches while driving profitable growth in the second half of the year.
JLR Improving
JLR volumes are seen growing both YoY and QoQ due to easing chip shortages and traction towards newer models.
Kotak Equities expects JLR volumes (excluding China JV) to increase by 5% QoQ, led by a strong order book, and this will result in a 7% increase in revenue.
A richer product mix and operating leverage benefits will drive the operational performance of the luxury carmaker.
All eyes will be on the free cash flow generation in the last quarter and if JLR will stick to its guidance.
JLR generated free cash flow of 300 million sterling in the September quarter and 751 million sterling in H1, which was JLR’s best H1 cashflow on record.
The net debt reduced to 2.2 billion sterling in the September quarter, with gross debt of 6.5 billion sterling.
JLR had said that production and wholesale volumes will gradually increase in H2. With a further improvement in margin, JLR also expects free cash flow of over 2 billion Sterling in FY24, and net debt reducing to less than 1 billion sterling by the end of FY24.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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