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Tata Motors Ltd. (TTMT), India’s biggest automaker, may fall in Mumbai trading after its main Jaguar Land Rover unit posted earnings that missed analysts’ estimates.
Jaguar’s fourth-quarter earnings before interest, taxes, depreciation and amortization of 605.4 million pounds ($945 million), missing estimates at Deutsche Bank AG and Nomura Holdings Inc. (8604) Standard Chartered Plc (STAN) cut its investment rating on the stock to the equivalent of a hold and Tata Motors American depositary receipts fell to a four-month low.
The results from the maker of the Range Rover Evoque chip away at the optimism that’s helped Tata Motors become the third- best performer this year among the world’s biggest automakers. Jaguar Chief Executive Officer Ralf Speth is counting on demand from China and Russia to help offset the economic slump across Europe.
“We see significant downside risks to our earnings estimates” because of Jaguar, Kapil Singh, a Mumbai-based analyst with Nomura, wrote in a report. “We expect the stock to react negatively on these results.”
Tata Motors, which reported earnings yesterday, said it booked a deferred-tax-asset gain of about 217 million pounds last quarter at the British luxury carmaker to reflect the improved business performance and outlook at Jaguar. That helped the unit’s fourth-quarter profit more than double to 695.9 million pounds. Stripping out the gains, profit would have been 422 million pounds, missing Nomura’s estimate by about 16 percent, Singh wrote.
Still, the Jaguar unit pushed earnings at the parent to a record. Net income at Tata Motors more than doubled to 62.3 billion rupees ($1.1 billion) in the three months ended March 31 beating the 38.2 billion-rupee median of 40 analyst estimates compiled by Bloomberg.
Tata Motors fell 0.3 percent to 275.75 rupees in Mumbai yesterday, before the announcement. Before today, shares had climbed 54 percent this year, trailing only Russia’s OAO Sollers and China’s Geely Automobile Holdings Ltd. (175) on the Bloomberg Global Automobile/Vehicle OEM Manufacturing (BRAUTOCV) index.
Tata Motors, which plans to invest 2 billion pounds ($3.1 billion) in Jaguar Land Rover this year, benefited from selling more of its luxury vehicles, according to Mahantesh Sabarad, an analyst at Fortune Equity Brokers India Ltd.
“We see strong volume growth going forward, especially from emerging markets such as Brazil, South Africa and India,” said Sabarad. “However, the sentiment in Europe remains a concern.”
The unit is planning to boost output after global March sales surged 51 percent from a year earlier. The company said March 13 it would add 1,000 jobs and move to three-shift, 24- hour production at its Halewood plant in England to meet demand for models such as the Range Rover Evoque.
The Evoque SUV, which Tata Motors introduced last year, has a waiting list of about three months, Chirag Shah and Siddhartha Bera, analysts at Emkay Global Financial Services Ltd. (EMKAY) wrote in a note dated April 23.
Jaguar Land Rover in April posted its biggest month-on- month decline in sales since Tata Motors started reporting data in November 2009 amid slackening demand in China and as the company also battles stalling demand in Europe. Sales of the automaker in Europe may slow, according to a May 16 report by Hitesh Goel, an analyst at Kotak Securities Ltd. in Mumbai.
“Nobody knows how deep, how long or whether anything will happen in Europe,” Speth said at a news conference in Mumbai yesterday. “We still see very strong demand for our vehicles in continental Europe.”
Tata Motors in March announced it’ll form a joint venture with China’s Chery Automobile Co. to build luxury cars for the world’s largest auto market. The venture, to be based in the eastern city of Changshu in Jiangsu province, will have a production capacity of 130,000 vehicles annually, according to a statement posted on China’s Ministry of Environmental Protection’s website.
Jaguar will unveil the F-type sports car in September that will go on sale as early as next April to boost sales. The automaker will introduce a station wagon version, also known as an estate model, for the XF this year.
Jaguar Land Rover sales rose 29 percent to 314,433 vehicles in the 12 months ended March 31, the company said in a statement last month. Deliveries of Land Rover SUVs accounted for more than 80 percent of total output.
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