While the top line was aided by a 49 per cent growth in the JLR unit, all key segments reported margin expansion. JLR accounts for over 80 per cent of the consolidated revenue. Given good Q4 showing, improving volume outlook, falling debt levels, and margin performance, brokerages have upgraded their earnings estimates for 2023-24 (FY24).
The order book for JLR remains robust at 200,000 units, with three-fourths of the pending orders for the Range Rover, Range Rover Sport, and Defender. With a production ramp-up, the company expects the order book to reduce at the rate of 5,000 units per month. Easing supply situations and steady demand are expected to help the company post a wholesale volume of 400,000 for FY24 (compared with 321,000 in FY23).
The company hopes to reduce net debt by £1 billion in the current year, compared with a debt of £3 billion in FY23 on the back of improving operating cash flow.
Analysts of Emkay Research, however, say that the company’s commercial vehicle business disappointed, with muted operating profit margin expansion (10.3 per versus expectations of 10.8 per cent), notwithstanding the benefits of operating leverage (21 per cent increase in on-quarter volumes), softening commodity prices, and lower discounts.
Revenue growth for the passenger vehicle segment came in at 15.3 per cent and was aided by a 10 per cent increase in volumes. Margins expanded by 40 bps to 7.3 per cent. The company expects the sector to grow 5-7 per cent, given a higher base and multiple headwinds such as inflation, high-interest rates, and incremental costs due to the impact of regulatory policies. The company seeks to improve passenger vehicle profitability (target to hit double-digit margins from 6.4 per cent in FY23).
Tata Motors will benefit from the commercial vehicle upcycle, stable growth in passenger vehicles, company-specific volume and margin drivers, a sharp improvement in free cash flow, and a reduction in net debt in both JLR and the India businesses.
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