Tata Motors Ltd. (TTMT), India’s biggest automaker, posted profit that beat analyst estimates as sales at its Jaguar Land Rover unit jumped, outweighing a loss at the company’s domestic division.
Second-quarter net income gained 71 percent to 35.4 billion rupees ($564 million), the Mumbai-based company said yesterday. That exceeded the 28 billion-rupee median of 39 analyst estimates compiled by Bloomberg. Profit at Jaguar Land Rover rose 66 percent to 507 million pounds ($815 million).
Retail sales at the luxury unit rose at the fastest pace in four quarters boosted by demand for Jaguar models, including the F-Type convertible that began shipping in May. The automaker has started sales of the Range Rover Sport, a sport utility vehicle, in some markets including the U.K. and China and plans to introduce the model in more markets.
“JLR is obviously enormously successfully right now, and it’s bizarre and unbalanced that it’s owned by a company that’s in structural decline,” Max Warburton, an analyst at Sanford C. Bernstein in Singapore with an “outperform” rating on the stock, said in a phone interview. Jaguar Land Rover “has just generated the best cash flow ever. That’s a game changer because they can start doing things with that.”
Sales at the company rose 30 percent to 557 billion rupees, exceeding the 536.6 billion-rupee median estimate.
Tata Motors rose 1.1 percent to 384.15 rupees in Mumbai trading yesterday, before the earnings were announced. The stock has gained 23 percent this year, compared with the 6.4 percent advance in the benchmark S&P BSE Sensex.
Retail sales at Jaguar Land Rover climbed 21 percent to 102,644 units in the quarter. Jaguar deliveries increased 57 percent to 20,024 units, while Land Rover sales rose 15 percent to 82,620 vehicles. That compared with a 29 percent decline in sales at Tata Motors’ Indian unit.
The luxury unit, based in Gaydon, England, expects sales of its Jaguar and Land Rover vehicles to increase across the world on new models, Chief Executive Officer Ralf Speth said at a press conference in Mumbai yesterday. Tata Motors bought JLR from Ford Motor Co. (F:US) in 2008.
China is the biggest market for Jaguar Land Rover and the country will widen its lead, Speth said.
China’s gross domestic product is expected to expand 7.6 percent in 2013, the weakest pace in 14 years, according to estimates compiled by Bloomberg.
“We have about 20 percent-22 percent of our volumes from China so we are not over-pronouncing Chinese demand,” Speth said. “If you look at JLR against the bigger premium players, we’re very small so there’s enough room to grow further.”
The luxury unit is in talks with the government in Brazil to set up a local assembly unit and expects a decision to be made by the end of the March, Speth said.
In contrast with Jaguar Land Rover, Tata Motors’ Indian unit posted a loss of 8.04 billion rupees in the quarter, compared with a profit of 8.67 billion rupees in the year earlier period. That was wider than the 5.48 billion-rupee median of six analyst estimates.
Sales at Indian unit fell 29 percent to 87.6 billion rupees, the sixth straight quarter of declines. The automaker plans to refinance 10 billion rupees of debt due in March, Chief Financial Officer Chandrasekaran Ramakrishnan said.
The company’s Indian market share dropped to 9 percent in the sixth months through September, compared with 13 percent in the year-earlier period, according to data from the Society of Indian Automobile Manufacturers. Maruti Suzuki India Ltd., the nation’s biggest carmaker by volume, increased its share to 41 percent from 37 percent.
“The India market share has gone down because people have lost interest in the product,” Warburton said. “The only way to change that would be to have a comprehensive new range of products.”
“Ultimately, the strategic solution for the India business is to fix, sell or close it,” Warburton said.
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