Photographer: Patrick T. Fallon/Bloomberg

Jaguar Land Rover's Profit Margin Improves on China, U.S. Demand

  • Jaguar Land Rover profit climbs 18% to 557 million pounds
  • Jaguar deliveries surged 81% boosted by demand for F-Pace

Tata Motors Ltd. headed for the biggest advance in six months after its luxury-car unit Jaguar Land Rover said new models will help it expand profit margins.

The company’s shares jumped as much as 5.1 percent and were trading at 466.6 rupees as of 10:16 a.m. in Mumbai. The stock was the best performer on the benchmark S&P BSE Sensex gauge, which gained 0.2 percent.

Tata Motors forecasts new version of the Discovery and Velar will help Jaguar Land Rover widen margins before interest and taxes to as much as 10 percent from 6 percent in the “medium term.” Sales of Jaguar, a British marque, surged 81 percent in the March quarter on demand for its F-Pace sport utility vehicle and entry-level XE sedan. The luxury unit’s Chief Executive Officer Ralf Speth told reporters in Mumbai on Tuesday that he sees demand sustaining momentum in China, North America and Europe.

“Tata Motors is our top pick in the Indian auto sector,” Amit Mishra, an analyst at Macquarie Capital Securities India Pvt. said in a note on Wednesday. “With the launch of new Discovery and RR Velar, we expect better model mix, strong volume growth and favorable currency to drive” JLR’s earnings, he said.

Earnings margin before interest, tax, depreciation and amortization for Tata Motors’s luxury unit grew to 14.5 percent of revenue in the March quarter, from 9.3 percent in the previous quarter. Net income at the unit jumped 18 percent to 557 million pounds ($722.5 million). Jaguar is benefiting from investments by Tata Motors and a fully overhauled product line.

Still, Jaguar Land Rover results failed to stem a profit decline at parent Tata Motors. Net income fell 17 percent to 42.96 billion rupees ($662 million) in the quarter from the year earlier, compared with the 25.8 billion-rupee average of analysts’ estimates compiled by Bloomberg.

Jaguar Land Rover will spend more than 4 billion pounds in the current fiscal year, including on its new factory in Slovakia, Tata Motors Chief Financial Officer C. Ramakrishnan said at a media briefing in Mumbai. The automaker has said it expects start of production at the plant in the second half of next year.

The company has also cut about 12 percent of its 13,000 managerial staff, Ramakrishnan said.

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