The shares of Tata Motors vroomed 8.20% on Friday’s early trades to reach an intraday high of ₹ 453.40 apiece after the company swung to make a profit after a hiatus of seven quarters. They were quoting at ₹ 444.55 apiece, up 6.09% at 11:35 AM on Friday.
The waning impact of the semiconductor chip shortage and the softening of raw material prices helped its UK Subsidiary and luxury car unit Jaguar Land Rover (JLR) turn profitable. Tata Motors also indicated that it will be able to improve its margins and profitability in the passenger vehicle segment, despite short-term challenges.
Tata Motors’ consolidated net profit came in at ₹ 3,043 crores in the October to December quarter against a net loss of ₹ 1,451 crores in the same quarter last year. Its total income jumped 22.9% year on year to ₹ 89,618 crores from ₹ 72,931 crores in the corresponding quarter last year.
The carmaker beat market expectations to post a profit for the first time after seven quarters on the back of a strong order book, better semiconductor chip supply, tempered commodity prices, and a better product mix.
JLR’s order book stood tall at 2,15,000 units and analysts liked the fact that new order bookings in the December quarter were higher than retails. They liked an improvement in net pricing in the commercial vehicle (CV) division and expect a likely improvement in the March quarter. However, they did not like the uncertainty regarding its supply chain.
Jefferies has a target price of ₹ 565.00 on the shares of Tata Motors. This indicates an upside of 27.09% as compared to its share price of ₹ 444.55.
Meanwhile Emkay Global has a target of ₹ 515.00 on the shares. It has revised its target price from ₹ 485 earlier. The given target translates to an upside of 15.84%.
Motilal Oswal Financial Services said that Tata Motors should witness a gradual recovery as supply-side issues ease (for JLR) and commodity headwinds stabilize (for the India business). It added that the company will benefit from a macro recovery in India, company-specific volume/margin drivers, and a sharp improvement in Free cash flow (FCF) and leverage in both JLR and the India business.
“We remain cautiously optimistic on the demand situation despite global uncertainties. We will remain vigilant on demand and our continued focus on profitable growth, improving semiconductor supplies and stable commodity prices will aid revenue growth, margin improvement and positive cash delivery in Q4 FY23,” Tata Motors said in an exchange filing.
Written by Simran Bafna
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