Tata Motors Q4 Results Analysis

Tata Motors Q4 Net Profit Slumps 47% YoY

The Q4FY19 results of Tata Motors Ltd were released/declared on 21^st 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 21^st 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

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 22^nd 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 1^st 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.