Tata Motors Q3 net up 40.5 per cent on strong JLR sales

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Tata Motors reported a stronger-than-expected 40.5 per cent rise in quarterly profit as robust sales at Jaguar Land Rover more than made up for weakness in its home market, sending up its stock to its highest level in more than a year.

Rising demand for luxury models, especially in China and other emerging markets, has swelled Tata's earnings over the past few quarters as demand for cars waned in India.

"JLR has shown improvements in volumes and margins in ways that were way beyond what the market expected," said Deven Choksey, chief executive of K.R. Choksey Shares & Securities.

Chief Financial Officer C.R. Ramakrishnan said strong sales at Jaguar Land Rover reflected a better product and market mix as well as strong demand in China and Russia, especially for the new Range Rover Evoque sport utility vehicle.

Tata Motors, part of the salt-to-software Tata conglomerate, said consolidated net profit rose to Rs 34.06 billion in the three months to December 31 from Rs 24.24 billion a year earlier. Revenue rose 44 per cent to Rs 452.60 billion.

Analysts on average had forecast a net profit of 26.13 billion rupees on revenue of 416.73 billion, according to Thomson Reuters I/B/E/S.

Tata, which also makes the ultra-cheap Nano, bought Jaguar Land Rover in 2008 from Ford Motor Co (F.N) for $2.3 billion, and has since turned it into its main profit driver.

Net profit in the company's India business dropped by more than half to Rs 1.74 billion, partly as a result of higher commodity costs and increased spending on marketing.

"An easing of commodity prices should see improvement on margins in the near term," Ramakrishnan said at a news conference after the release of the results on Tuesday, adding that higher sales volumes would help margins in coming quarters.

Choksey, however, noted that overall car sales in China appear to be coming down. "How the China demand moves is the only caution looking forward," he said.

January car sales in China fell 23.8 per cent from a year earlier, the biggest monthly drop in more than three years.

In India, car sales are heading for their first annual fall in 10 years as high interest rates and rising fuel costs dampen demand.

"Concerns remain on the overall macroeconomic picture ... which could impact commercial and passenger vehicles," said Ramakrishnan. "But we are cautiously optimistic."

JLR SOARS
Revenue at Jaguar Land Rover rose nearly 41 percent to 3.75 billion pounds, while profit rose 57.4 per cent to 440 million pounds. Profit margins at JLR were 20.1 per cent, compared with 6.7 per cent in the domestic business.

China and Russia accounted for 22.4 per cent of JLR's sales during the quarter, Ramakrishnan said, as total vehicle sales rose 37 per cent to 86,322.

Tata's planned manufacturing joint venture with an as-yet unnamed Chinese partner was 'on track,' JLR chief executive Ralf Speth told reporters, without providing details.

Tata assembles some Land Rover models in India for the local market, and this will gradually increase as growth in luxury car demand far outstrips that for overall car demand, he said.

Shares in Tata Motors, which the market values at about $15 billion, rose as much as 5.6 per cent to Rs 272.70, their highest level since December 2010, before closing up 3.7 per cent at Rs 267.95.