Tata Motors Gains Most In Seven Months As Analysts See Recovery In India Business, JLR Volumes
Shares of Tata Motors Ltd. gained the most in seven months as analysts expect Jaguar Land Rover volumes to recover, and domestic business to improve aided by a revival in demand for commercial vehicles and production ramp up for passenger vehicles.
The optimism stems even as the automaker posted loss for the fifth straight quarter, albeit narrower, amid supply-side disruptions and rising input costs.
Tata Motors Q4 FY2022 (Consolidated, YoY)
Revenue down 11% at Rs 78,439 crore (Bloomberg consensus estimate: Rs 80,928 crore).
Ebitda down 32% at Rs 8,726 crore (Estimate: Rs 8,553 crore).
Ebitda margin at 10.6% against 14.4%.
Net loss at Rs 1,033 crore against a loss of Rs 7,605 crore (Estimated profit: Rs 286 crore).
“The supply situation is gradually improving, whereas commodity inflation is likely to remain at elevated levels,” Tata Motors said in a statement.
Analysts, too, see a deterioration of JLR product mix, Covid-related lockdowns in China, semiconductor shortages as near-term challenges. But they expect the automaker to remain resilient, helped by new launches, price pass-ons and a strong order book.
Shares of Tata Motors surged over 12.6% in intraday trade before closing with 8.6% gains on Friday. The trading volume on the stock is nearly quadruple the 30-day average when markets closed on Friday. Of the 33 analysts tracking the company, 26 maintain a 'buy', three suggest a 'hold' and four recommend a 'sell', according to Bloomberg data. The average of the 12-month target price implies an upside of 29.6%.
The stock was the top gainer on the benchmark Nifty 50.
Here's what analysts have to say about Tata Motors' Q4 FY22 results.
Jefferies (First Cut)
Reiterates 'buy' with a target price of Rs 540—an implied upside of 45.04%.
Values core India business at 13.5 times September 2023 EV/Ebitda, JLR at 2.5x September 2023E EV/Ebitda and India EV business at Rs 67 apiece.
Ebitda margin in domestic passenger and commercial vehicles rose higher than expected.
Expects domestic business to improve in FY23 led by demand revival, strong passenger vehicle portfolio and margin recovery.
Key risks: Demand downturn in Indian trucks, global luxury autos and JLR's inability to deliver on EVs.
Retains 'buy', cuts target to Rs 485 from Rs 530—still an implied upside of 20.11%.
The Q4 performance was a mixed bag with the JLR mix deteriorating further due to runout of the old Ranger Rover.
Sees the recovery in India businesses as 'strong'.
Near-term pressures due to Covid-related lockdown in China are likely to continue despite strong demand for JLR.
Demand recovery in CVs and production ramp-up in PVs should aid Indian business.
Cuts FY23/24 consolidated EPS estimate by 12% each to account for fall in volumes in JLR, semiconductor shortage, cost inflation and translation impact of currency appreciation against the Green Britain Pound on JLR consolidation.
Expects demand to witness gradual recovery as supply-side issues ease and commodity headwinds stabilise for India business.
Sharp improvement in free cash flows and leverage in both JLR and India business is likely to aid growth.
Reiterates 'buy', lowers target to Rs 600 from Rs 656—still an implied upside of 48.88%.
Maintains a positive stance on the company citing likely gains in PV segment, CV volumes, revival in JLR and strong order book.
Cost controls aided the positive surprise on Ebitda margin.
Constraints led by Covid-linked lockdowns in China is likely to cause near-term pain.
Expects new products (Range Rover deliveries), demand momentum and price pass-on to improve profitability.
The company's ability to gain market share across segments bodes well for growth prospects.
Maintains 'buy', cuts target price to Rs 677 from Rs 702.
Operational performance exceeded estimates aided by higher margin for CV, India PV and JLR segments.
Rise in wholesale volumes in JLR and margin expansion amid adverse raw material costs and adverse mix are key positive factors.
Expects firm to benefit from the CV cycle revival as Tata Motors is the market leader in domestic CVs.
Maintains 'buy' with a target price of Rs 615.
Performance was better-than-expected with Ebitda margin coming in at 11.1% vs the brokerage's estimate of 10.7%.
Expects near-term challenges for JLR as well as domestic business to continue due to semiconductor shortage, higher commodity inflation and global supply chain disruptions.
Expects situation to normalise in the second half of the financial year with reducing commodity prices and normalised inflation.