Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tata Motors Ltd (BOM:500570, Financial) reported a 5.7% growth in revenue for Q1 FY25, driven by favorable commodity prices and improved profitability across most business segments.
- Jaguar Land Rover (JLR) achieved a record Q1 revenue of GBP 7.27 billion, with a 5.4% increase year-over-year, and a strong PBT of GBP 693 million.
- The company reported positive cash flow in Q1, traditionally its weakest quarter, indicating strong financial management.
- Tata Motors Ltd (BOM:500570) is on track with its demerger and corporate restructuring plans, expected to be completed by July 1, 2025, which should streamline operations and improve focus.
- The company is making significant strides in electric mobility, with the launch of the Tata Curvv and the deployment of over 2,900 electric buses, reflecting its commitment to sustainability and innovation.
Negative Points
- Despite the revenue growth, Tata Motors Ltd (BOM:500570) experienced only a 2.5% increase in volumes, indicating potential challenges in market demand.
- Net debt increased marginally due to dividend payouts and seasonally negative cash flow, which could pose a risk if not managed effectively.
- The company faces supply chain disruptions, particularly in aluminum supply, which could impact production and financial performance in the coming quarters.
- The Passenger Vehicle (PV) segment saw a decline in revenues by 7% due to lower EV sales and a weaker mix in ICE vehicles, reflecting market challenges.
- High channel inventory levels in the PV segment, currently between 35 to 40 days, are above the targeted 30 days, indicating potential overstocking and pressure on sales.
Q & A Highlights
Q: July data seems to be quite weak for M&HCV. Any sudden changes you have noticed? Should we expect improvement post elections and heat wave, and how do you see the full year?
A: In Q1, we saw good fleet utilization and positive improvement in kilometers run by trucks. However, in July, heavy rains impacted infrastructure projects, mining operations, and goods transport, leading to postponed purchases and a drop in volume. We expect payments to be released from the government, which should lead to action. Good monsoons, policy continuity, and higher allocation to infrastructure projects should help M&HCV demand in the long term. - Girish Wagh, Executive Director
Q: Where did the money go if there is a INR2,600 crores debt increase quarter-on-quarter?
A: The debt increase is due to the dividend that went out of Tata Motors to its shareholders. India had a negative FCF, and the debt increase is temporary. As profits come through the quarters, this will correct. - Pathamadai Balaji, Group CFO
Q: What's the current dealer inventory in the India PV business? How does it compare with the industry and Tata Motors' own normalized historical numbers?
A: Our current dealer inventory is between 35 to 40 days. Typically, we target about 30 days, so it is on the higher side. - Shailesh Chandra, MD, Tata Motors Passenger Vehicles Ltd
Q: With 8.9% EBIT margin in a seasonally weak quarter for JLR, are we expecting any headwinds for margins for the remaining of FY25?
A: 8.9% is consistent with our full-year guidance of greater than or equal to 8.5%. The biggest headwind is the supply of aluminum, but we aim to compensate for it to hit our EBIT targets for the year. - Richard Molyneux, CFO, Jaguar Land Rover
Q: Can you explain the Freelander brand's fit into JLR's modern luxury house of brands approach?
A: Freelander is outside of our house of brands. It will be a license agreement where the JV in China licenses the brand from JLR and combines it with Chery's technology to produce vehicles under the Freelander brand for the Chinese market. - Richard Molyneux, CFO, Jaguar Land Rover
Q: How substantial can the impact of aluminum shortage in Q1, Q2, and Q3 be?
A: We are working on compensating for the aluminum shortage. Our industrial operations team is finding alternative sources, and we are leveraging the Tata ecosystem. We aim to hold our full-year EBIT and net cash targets. - Richard Molyneux, CFO, Jaguar Land Rover
Q: How are we treating PLI? Are you accruing it?
A: We take a conservative accounting policy for new incentive schemes. We plan to file claims by September 30. All our EV products are TBA compliant, and the certification process is underway. - Dhiman Gupta, VP, Finance
Q: Why did Tata Motors only get 4.7% of the merged capital while assets were almost 20%?
A: The books of Tata Capital and Tata Motors Finance have different return profiles and levels of concentration. Diversifying the book before IPO would require capital infusion. The merger increases diversification and is beneficial for Tata Motors. - Pathamadai Balaji, Group CFO
Q: Do you expect any favorable support for CVs in FAME III?
A: We expect similar support to be extended to trucks and hydrogen as a fuel, which will help seeding electric trucks in some use cases. - Girish Wagh, Executive Director
Q: Can you comment on the order backlog at JLR?
A: The order backlog at the end of the quarter was 104,000 units, in line with expectations. - Richard Molyneux, CFO, Jaguar Land Rover
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
