Tata Motors Q2 preview: The business could become profitable because to low material prices and operational leverage

 Tata Motors Q2 preview: The business could become profitable because to low material prices and operational leverage

The nation's top producer of electric vehicles is expected to surprise with high profits thanks to robust JLR sales.

Prabhudas Lilladher, a domestic brokerage business, is benefiting from falling commodity prices.

With a net profit of Rs 3,215 crore in the second quarter, Tata Motors, the largest producer of electric vehicles in India, is predicted to stay profitable because to operational leverage, JLR's volume ramp-up, and declining commodity prices. On November 2, the Nexon manufacturer is scheduled to release its Q2 earnings.

Five trading companies' average forecast is that the business would generate Rs 1,01,155 crore in income from operations, a 28 percent rise. The company's revenue for the same time in the previous year was Rs 79,611 crore.

The British company Jaguar Land Rover's stronger sales mix and increased operational leverage are likely to contribute significantly to Tata Motors' predicted 650 basis point annual gain in EBITDA margins, or profits before interest, taxes, depreciation, and amortisation, to 14.3 percent. According to BNP Paribas analysts, "We believe Tata Motors to surprise positively on profit margins, driven by strong JLR sales," in a note.

In China, a key market for the high-end JLR series, the business had many difficulties during the same quarter previous year as a result of Covid-related limitations. During the same era, the firm, like practically every other, had to deal with severe supply chain problems. Tata Motors had a net loss of Rs 898 crore during the same period in the previous year.

With the exception of its joint venture in China, Chery Jaguar Land Rover, JLR's volumes are expected to increase by 29% over the previous quarter and by 4% sequentially. IIFL Securities analysts predict that the high-margin "RR + RR Sport + Defender" volume share will stay at 64 percent. Defender is the flagship Land Rover vehicle, whereas RR denotes the Range Rover variants produced by JLR.

The business is expected to benefit from tailwinds like as low commodity prices, minimal discounting, stable market share in the passenger car category due to a redesigned portfolio, and leadership in the rapidly expanding EV segment, according to brokerage firm Prabhudas Lilladher.

KR Choksey analysts report that the business has maintained pricing control, which has improved average selling prices and profitability. Given the increasing demand and the OEMs' bolstering of margins to allow for upcoming expenditures in higher-order technology, the trend is anticipated to continue.

The business turned a profit again in the prior. Strong sales at its JLR luxury car division and an increased margin from its passenger vehicle sector helped it earn a combined net profit of Rs 3,203 crore.