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The shares of Tata Motors plunged 3.75% to hit an intraday low of ₹ 427.40 on the NSE. Its consolidated losses for the first quarter ended June 2022 deepened. This happened due to semiconductor woes, coupled with a lockdown in China and volatile foreign exchange, dented earnings at Jaguar Land Rover (JLR) Automotive — its UK subsidiary.

The company’s business in India was able to trim losses to ₹ 181.03 crores, from Rs 1,320.74 crore due to the company’s strong operational performance in the commercial vehicles/passenger vehicles business. However, the losses at the consolidated entity widened to ₹5007 crores as compared to ₹ 4451 crores. The Tata Group company’s EBITDA margin was at 7.4% for the quarter, while its EBIT increased to -0.7%.

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JLR’s retail sales fell 37% to 78,825 units from the year-ago quarter and the losses widened to £482 million, from £286 million, however, the sales remained flat as compared to the preceding quarter.

The shares are currently trading at ₹ 441.70 apiece. Brokerages are bullish on the stock despite the widening losses and see upto a 23% upside going forward.

Should you buy, sell or hold Tata Motors?

Motilal Oswal Financial Services 

Analysts at Motilal Oswal say that the company might witness a gradual recovery as supply-side issues ease (for JLR) and commodity headwinds stabilize (for the India business).  It said that the auto major might benefit from a macro recovery, company-specific volume and margin drivers, and sharp improvement in FCF and leverage in both JLR as well as the India business. The brokerage has a ‘buy’ rating on the stock with a target price of ₹ 520 per share. This indicates an upside of 17.72%.

Jefferies

The brokerage has a ‘Buy’ rating on Tata Motors’ shares with a target price of ₹540, and an upside scenario price target of ₹605. This indicates an upside of 22.25% as compared to the current market price.

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Tata motors expect the demand for JLR to remain strong despite concerns of high inflation and geopolitical uncertainties. Further, the company is in advanced stages of closing Ford India’s manufacturing facility in Sanand, Gujarat, for the production of its passenger vehicles. This factory will give Tata Motors an additional annual production capacity of 2,40,000 units.

Written by Simran Bafna

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