Lower margins hurt Tata Motors
Domain-b and Yahoo: Tata Motors (NYSE: TTM) was under pressure today as company reported results for quarter ending September 30th, 2006. The stock closed the day down about 4% as the company reported deteriorating operating margins. Operating margins as a percentage of net sales declined to 11.97% from 12.54% a year ago. The company blamed the margin pressure on higher raw material costs such as steel and rising interest rates. However, two of Tata Motors biggest competitors Mahindra and Mahindra (M&M) and Maruti both reported higher margins at 13.22% and 13.9% respectively.
I reported earlier about slowing growth in September sales numbers and pressure on margins, so this wasn’t totally unexpected.
Input costs went up by 40.85% while employee costs increased by a 55.56% and other operating expenses were higher by 46.14% YoY.
The overall numbers, however, didn’t look bad:
- Net profit up 36% YoY to $98 million.
- Net sales were up 37% YoY to $1.46 billion.
- Exports grew by 18% YoY
- Market share in commercial vehicles grew from 58% to 65%
- Passenger vehicle market share barely grew from 15.8% to 16.3%
Bottomline: We in the United States only have a handful of Indian ADR’s to choose from and Tata Motors remains one of the best out there. However, it’s the only one in its sector listed in the US. There is a choice in Banks, IT, Internet, Telecom but not automobile sector among the listed ADR’s and the auto sector is booming like everything else in India. I am going to keep an eye on this and might buy if it goes under $15.