Brokerage mixed on Tata Motors after Q2 update; stock crashes 5%

New Delhi: plunged as much as 5% in Monday’s trade after the company’s luxury arm Jaguar Land Rover (JLR) reported a muted update for the September quarter.

Jaguar Land Rover reported a 4.9% decline in retail sales at 88,121 units in the second quarter ended September 30, 2021. The company had posted retail sales of 92,710 units in the same quarter previous fiscal.

Sales of the Jaguar brand were at 17,340 units in the second quarter as against 19,248 units in the year-ago period, down 9.9%, the company added in the exchange update.

Similarly, sales of the Land Rover brand were down 3.65% at 70,781 units as compared to 73,462 units in the same quarter a year ago.

Following the announcement, shares of Tata Motors plunged about 5% to Rs 393.70, before recovering to Rs 396.7 at 10.30 am. The scrip was settled at Rs 412.20 on Monday.

“While there was an improvement in sales in the second quarter, it remained constrained by semiconductor shortages,” the company said in a statement.

The company continues to see strong demand for its products, with global retail orders again setting new records in the quarter, it said adding, that as of September 30, 2022, the total order book has grown to 2.05 lakh units, up around 5,000 orders from June 30, 2022.

However, brokerages remain mixed on the stock after the company’s updates. JP Morgan has downgraded the auto major to ‘neutral’ from ‘overweight’ and slashed its target price to Rs 455 from Rs 525 earlier.

JLR’s free cash flow (FCL) generation is delayed for now and its Q2 wholesale numbers disappointed but retail sales were slightly better, it said. “Zero net debt target could get pushed beyond FY25.”

However, domestic brokerage firm ICICI Direct has a buy call on Tata Motors with a target price of Rs 460 for the near term.

“With a broader vision in place, other positive drivers include secured funding for its EV business (PV), the launch of affordable offerings in the E-PV domain (Tiago) and big order wins in the electric-bus space domestically,” it said.

Other brokerages believe that all three businesses of TTMT are in recovery mode. While the India CV business will see a cyclical recovery, the India PV business is in a structural recovery mode.

JLR is also witnessing a cyclical recovery, supported by a favourable product mix, said

, which has a buy rating on the stock with a target price of Rs 510, hinting at a 30% upside from Monday’s intra-day lows.

“However, supply-side issues will defer the recovery process,” it added. “While there will be no near-term catalysts from the JLR business, the India business (50% of SoTP) will see a continued recovery.”

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)



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