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Q4 FY2019 Results of Tata Motors

Tata Motors Q4 Results Analysis

Tata Motors Q4 Net Profit Slumps 47% YoY

The Q4FY19 results of Tata Motors Ltd were released/declared on 21st May 2019. In this article, we will discuss Tata Motors Q4 FY2019 consolidated and standalone results in detail.

The results are better than the estimates made by mist of the analysts. But still after the results were declared the share price of Tata Motors fell by around 6% on 21st May 2019. What has happened that even after the results being better than the estimated of most analysts, that the stock of Tata Motor fell?

When results are declared one should also have a look at the commentaries released by the management of the company, of both Tata Motors India and JLR. The analysts are feeling a little cautious after hearing the commentaries from the people of the company. Thus, this can be negative and the selling pressure was created in the market.

Tata Motors Q4 FY2019 Results Analysis

Tata Motors Q4 FY2019 Results
Tata Motors Q4 FY2019 Results

Q4 FY2019 consolidated results

In consolidated results, numbers of both Tata Motors India business as well as business of JLR has been included.

  • Net Profit : The Net Profit numbers of the preceding numbers should also be taken into consideration here. In Q1FY19, there was net loss of around Rs. 1,800 Cr. In Q2FY19, a net loss of around Rs. 1,049 was reported by the company. And in the last quarter, that is in Q3FY19 the company has reported a net loss of around Rs. 26,993 Cr owing to the JLR China asset impairment action. Thus, after seeing such negative quarters, the numbers of this quarter can be considered as a silver lining.
  • The JLR business has shown signs of revival now. JLR still has a lot of debt on them. There are very sleek chances that the Free Cash Flow of the company will come on the positive side. The company has stated that their Free Cash Flow will come positive in FY21. The company has already started taking actions for that and in that direction. They have made plans for debt reduction and cost cutting, etc.
  • Hence, after very heavy losses in the last 3 quarters, especially in the Q3 quarter, now the company’s net profit numbers have become positive. This is very positive sign.
  • Sales : The sales of the company have increased minutely but the net profit of the company has still fallen significantly.

Thus, FY18-19 has been a very loss making year for the company. But the company has taken the corrective actions which were necessary.

Q4 FY2019 Standalone results

In standalone results, only the numbers of India business of Tata Motors are included.

  • Sales : The sales of Q4 FY19 have gone down marginally (3%) in India. FY2019’s YoY Sales growth of almost 17% in the sales numbers of Tata Motors India business is a very good sign.
  • Net Profit : The Net profit has improved considerably. But when this compared with the preceding quarter numbers then the net profit for this quarter has gone down. The net profit numbers are better. Not only have they covered the losses of last year but also made significant profits this year. In a way, Tata Motors made a net profit of around Rs. 3,000 Cr this year from their India business. (Just saying for comparison, this does not mean that extra amount cab be seen in their accounts)

Latest Financials

  • Market Capitalisation – Rs. 50,991 Cr
  • Share Price – Currently the stock is being traded between Rs.170 and Rs.180. As per the closing on 22nd May 2019, the share price of tata Motors was Rs. 179.70.

Auto Industry

  • The auto industry is going through some changes right now. Some new emission and safety norms have been released. Because of those norms the auto companies have to make changes and some also have to shut down the production of some of their models.
  • In passenger vehicles, if one is carrying less than 9 people then the safety norms regarding the airbag compulsions is going to increase costs to the companies.
  • From 1st April 2020, the emission norms are going to come in action and many diesel variant cars will not be produced anymore. Maruti Suzuki India was the first to take a call regarding this and now Tata Motors has also done the same.

Summary

  • If India business has a net profit of Rs. 106 Cr this quarter, then around Rs. 1,011 Cr of net profit is from their JLR business. This a positive sign for Tata Motors as their JLR business is showing signs of revival.
  • Thus, there are chance that the coming quarters might be better.
  • Tata Motors is expecting a lot of changes in JLR by FY21 and all on the positive side.
  • The domestic business of Tata Motors is running very successfully.
  • The coming quarters can be challenging owing to the pressures faced because of changed Emission and Safety Norms.
  • The company can receive attractive valuations in the future if all the things go according to the plan of the company, the automobile industry revives and the economy improves.

Notes: –

  • The numbers that are used are approximate and have been rounded for presentation purposes.
  • We are not in any way saying that this is a bad company, or the stock of this company is bad.
  • We are also not suggesting anyone to immediately go and buy the stock or invest in the stock markets.
  • Only an analysis has been presented here. No judgments or final statements are being made here.
Tata Motors hits a 52 week low share price

Why is the Stock of Tata Motors Falling?

Tata Motors’ dismal performance in Q3 hits a 52-week low share price Rs.129 (on February 8, 2019)


After reporting Rs 26,960.8 crore quarterly loss-biggest in the Indian corporate history, the Tata Motors share price came under intense selling pressure in trade today.
Tata Motors Limited is an Indian multinational automobile manufacturing company. It is headquartered in Mumbai. It’s a subsidiary of Tata Group, an Indian conglomerate. The diverse product portfolio of Tata Motors Ltd. include passenger cars, trucks, vans, coaches, buses, sports cars, construction equipment and military vehicles.
Jaguar Land Rover (JLR) Automotive PLC is the holding company of Jaguar Land Rover Limited, a British multinational automotive company. It’s headquarter is in United Kingdom, and is a subsidiary of the Indian multinational automobile manufacturing company Tata Motors Limited.

The Q3FY18-19 results of Tata Motors Limited were released/declared on 8th February 2019.

Reasons behind Tata Motors Share price drop
Why is Stock of Tata Motors Falling ?

The company reported a record Rs 26,961-crore loss in December Q3 quarter, largely on account of a massive $3.1 billion pound impairment of Jaguar Land Rover (JLR) assets. The fall was seen as analysts cut earnings target for the company by up to 25 per cent.

The Huge Loss Explained
JLR had made some investments in China amounting to more than 3.1 billion pound, which is investment of more than Rs. 30,000 crores. So, this asset impairment is more of an accounting entry rather than actual losses or any other negative thing.
Asset Impairment is the revaluation of an asset on the balance sheet of the company. An impairment loss takes place when the company revalues its assets, as the book value of the assets is more than the actual realizable value of the assets when sold in the market.
For example, when Microsoft had acquired Nokia that time they too had booked an asset impairment loss as that acquisition didn’t work quite well for Microsoft. So, there they too had used an accounting entry of asset impairment.
Similarly, Tata Motors has taken all the investments of JLR done in China as exceptional items and booked an asset impairment loss.
That is why we can see a consolidated Total Loss of Rs. 26,961 crores in the Q3FY18-19 results of Tata Motors Limited.

The biggest reason behind this is JLR as explained above. The sales of JLR in China are down by almost 50-60%. And this sales drop has happened because of the negative sentiments created in the China market as a result of the US-China trade war. The trade war has an automatic impact on the consumption and this reduced consumption decreased the JLR sales.

The silver lining here for JLR is that the sales numbers from Europe and USA are good.

Now Tata Motors has taken a one time hit. For future Tata Motors has started making investments to cope with the technological improvements, vehicle advancements, increasing demand of electric vehicles.

Standalone Numbers
These are the numbers of the domestic business of Tata Motors Ltd.

  • Revenue :
    The revenue was reported as Rs. 16,208 crores, up by 1.5% YoY. This is a very good number because the company registered these numbers even in a negative cyclic trend.
    As mentioned in our earlier article: Why Ashok Leland’s share price is falling? The Auto industry is going through a negative cycle. Typically, the Auto industry has a cycle of good 4 years and this time it got extended to a 5th year. That is why the next 1 or 2 years may be a little sluggish.
  • Commercial Vehicles Segment :
    The major contributor in the numbers of Tata Motors is the segment of Commercial Vehicles. 0.5% of market share of the commercial vehicles segment has been additionally gained by Tata Motors. Now they have a market share of almost 51%-52% in commercial vehicles segment.
  • Passenger Vehicles Segment :
    In passenger vehicles segment too, similar 0.5% of market share has been additionally gained by Tata Motors. This happened because of the product pipeline combining of new and old cars received positive response in the market.
  • Profit After Tax (PAT) :
    The standalone PAT was reported at Rs. 618 crores in Q3 FY2018-19. Last year in same quarter (Q3FY17-18), the PAT stood at Rs. 212 crores. A growth of almost 200% in the profitability.

Share Price Movement :

Falling Trend of Tata Motors Share price

The Tata Motors share price crashed to a fresh 52-week low of 129.0 on NSE, down 29.54% or 53 points compared to the previous close of 182.85 on NSE. 
The current (8th February) share price of Tata Motor is around Rs. 150.70
On 7th February 2019 the share price of Tata Motors closed at Rs. 182.85.The result was declared after the market timings. On 8th February 2019, when the market opened the stock received a strong negative reaction and is down by almost 32.15, 17.58% fall.

Market Capitalisation :
The market cap of Tata Motors went almost up to Rs. 180000 crores when you look at the last 2-3 years.
Now, according to the current price, the market cap has come down to almost Rs. 47,079 crores.
This is the result of factor-ins done by the market. This reduced market cap tells is how the market already factor-ins certain expected things. Market had already started discounting owing to the poor numbers of JLR.

Turnaround 2.0
This is a campaign launched by Tata Motors. Under this campaign, they have revamped the whole domestic business of the company. JLR has helped in this a lot.
For example, looking at the latest offering by Tata Motors, the Tata Harrier gives an idea of the new Tata Motors and it does not look like any of the old ones.

Summary :

  • There is no problem in the domestic business of Tata Motors Limited.
  • The market has given a negative reaction to Tata Motors Q3 results.
  • The Total Loss is a result of an accounting entry rather than having incurred actual losses.
  • Tata Motors has made notable investments in the technology side.
  • No more negative surprises will be there from China investments of JLR.

Notes :

  • Q3FY18-19 = Quarter of Oct-Dec of 2018
  • Q3FY17-18 = Quarter of Oct-Dec of 2017
  • The numbers that are used are approximate and have been rounded for presentation purposes.
  • No suggestions are been made as to whether this is a good or bad company/stock.
  • No suggestions are also being made to go and immediately buy the stocks of this company or go invest in the stock market.

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