August 12, 2014 at 1:50 pm

Tata Motors surges as profit jumps on Jaguar demand in China

Tata Motors Ltd., India’s biggest automaker, rose the most since September in Mumbai trading after beating analysts’ estimates with a threefold jump in profit.

The shares climbed 6.2 percent to 474 rupees, the largest gain since Sept. 10. Net income rose to 54 billion rupees ($883 million) in the quarter ended June, the Mumbai-based company reported yesterday. That beat the 37.9 billion-rupee median of 34 analysts’ estimates compiled by Bloomberg and was the biggest profit increase since the three months ended December 2010.

Sales of Jaguar and Land Rover in China, the world’s largest car market, surged 61 percent helping Tata Motors, which is struggling to revive demand in India, boost profit. Deutsche Bank AG and Credit Suisse Group AG were among brokerages which raised their share price target for the maker of Nano hatchback and Indigo sedan after the earnings announcement.

“JLR benefited from strength in China demand,” Govindarajan Chellappa and Rajasa Kakulavarapu, analysts at Jefferies, wrote in a note today. “Strength in China is the key to sustenance of the high levels of profitability.”

Profit at the luxury unit more than doubled to 693 million pounds ($1.16 billion) on demand for the F-Type convertible and Range Rover SUVs. Tata Motors group revenue climbed 38 percent to 646.8 billion rupees.

Deliveries at Jaguar Land Rover climbed 22 percent to 115,596 vehicles in the quarter, bolstered by the F-Type that began shipping last year and the new and refreshed Range Rover line up.

Tata Motors is striving to turn around its local business.

The brand is unveiling its first new car model in five years this week. The compact sedan, called the Zest, was developed to revive profitability at the Indian business as it lost market share to Maruti Suzuki India Ltd. and the local unit of Seoul-based Hyundai Motor Co.

Tata Motors’ domestic passenger-vehicle deliveries fell 37 percent in the quarter, according to the Society of Indian Automobile Manufacturers. The company’s truck sales dropped 25 percent in the same period.

“The domestic business has been a drag,” said Juergen Maier, a fund manager at Raiffeisen Capital Management in Vienna. “But we hope that with the new passenger vehicle models and the commercial vehicles picking up, things will get better.”

The local business of Tata Motors reported a profit of 3.94 billion rupees, after receiving a dividend of 150 million pounds from Jaguar Land Rover.

The automaker’s luxury unit is also building a mid-size sports sedan called the XE, which it will unveil next month and will go on sale in 2015.

The Jaguar XE, to be unveiled in London on Sept. 8, will compete against BMW’s 3 series and Mercedes-Benz’s C Class models. The Jaguar will be the only car in its segment to be built on an aluminum platform that will help it go 75 miles on a gallon of fuel, the company has said.

The XE model will feature four cylinder, 2-liter gasoline and diesel engines built at the company’s new engine factory, according to the carmaker.