Should Investors Book Profit or Hold Tata Motors Shares Following Q4 Results?

  • May 13, 2022, 12:01 p.m.

Tata Motors’ share price jumped 8 percent in early trade on May 13-a day after the company reported its March quarter earnings. The company’s shares surged 8 percent in opening deals at Rs 401 on the BSE after the homegrown automaker’s net loss narrowed to Rs 1,033 crore in the quarter ended March, compared to a loss of Rs 7,605 crore in the year-ago period. It witnessed an over 11 percent year-on-year (YoY) drop in revenue to Rs 78,439 crore.

The company, in a statement, said, "The demand remains strong despite geopolitical and inflation concerns." The supply situation is gradually improving, whereas commodity inflation is likely to remain at elevated levels. We expect performance to improve through the year as the China COVID-19 and semiconductor supplies improve and aim to deliver strong EBIT (earnings before interest and tax) improvement and free cash flows in FY 23 to get to near net auto debt-free by FY 2024. "

For the Jaguar Land Rover (JLR) business, revenue was £4.8 billion in the fourth quarter, down 27 per cent over last year, hit by the runout of the previous generation Range Rover.

Tata Motors: What Should Investors Do?

"We maintain our positive stance on Tata Motors as the PV segment will likely gain further market share led by a revamped portfolio, customer preference for SUVs and rising EV penetration. CV volumes will continue to benefit from the cyclical upturn, improving fleet utilization and freight rates, revival in JLR and a strong order book to benefit and drive FCF generation," said brokerage Prabhudas Lilladher.

It has maintained its ‘Buy’ rating on Tata Motors shares with a revised SOTP based on FY24 target price of Rs 600. The brokerage expects 1QFY23 to witness pressure. However, over FY23, new products, demand momentum, and price pass-ons will improve profitability, in its view.

Jaguar Land Rover’s (JLR) revenue was £4.8 billion in the fourth quarter, which is 27 percent lower as compared to last year, hit by the runout of the previous generation Range Rover.

"JLR’s order book is strong at 168,000 units, while dealer inventories are low." New generation products like RR/RR Sport are expected to support order-bookings ahead. Chip supplies should improve going forward, but in a staggered manner. We expect a strong 20 percent CAGR over FY22–24E. "We reaffirm Buy with a revised SOTP-based target price of Rs 535 (Rs 530 earlier), based on June 2024E (March 2024E earlier) estimates," said Emkay.

Broking house CLSA has upgraded the rating of Tata Motors to underperform from sell and also raised the target price to Rs 411 from Rs 392 per share. Its domestic business was strong, while JLR challenges continued to disappoint due to the negative surprise on ASP. The volumes, mix and higher realisation led to margin recovery in CV and PV, while strong demand should lead to volume growth.

Author : Rajdhani Delhi Representative

Rajdhani delhi representative

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