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Should investors buy, sell, or hold Tata Motors after Q1 earnings? Here’s what brokerage say

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Tata Motors' revenue more than doubled in the first quarter of FY22 to Rs 66,406 crore. While most brokerages are bullish on the auto major, UBS is 'neutral' given the lack of a strong EV pipeline and rising competition in the EV sector.

Should investors buy, sell, or hold Tata Motors after Q1 earnings? Here’s what brokerage say
Homegrown auto major Tata Motors' net loss for the first quarter of the financial year 2022 narrowed to Rs 4,450 crore from Rs 8,437 crore posted a year ago. However, the net loss was higher than CNBC-TV18’s estimates of Rs 1,379 crore.
The auto major reported a 107 percent rise in its revenue during the period under review at Rs 66,406, 1.5 percent higher than CNBC-TV18’s estimates.
While its India operations have shown a significant improvement from a year ago, quarter-wise the numbers contracted. The company said it was due to the second wave of COVID-19 infections that gripped the country during April-May.
The surge in infections created some supply issues that slowed down the growth momentum of the company as compared to the previous quarter, the company said in an exchange release.
But the automaker expects the performance to improve from October onwards, majorly on the back of an improved supply chain.
Its British arm, Jaguar Land Rover (JLR) reported a loss of 110 million pounds. However, JLR’s retail sales were up 68 percent in the first quarter as the company sold 1,24,537 vehicles.
Here’s what brokerages say:
Jefferies
The brokerage is bullish on the stock with a target price of Rs 435. It has cut its FY22 EPS estimates by 34 percent but has broadly maintained its FY23 EPS estimates, the brokerage said in a morning note.
Jefferies expects Tata Motors’ India business to improve sequentially as demand rises.
ICICI Securities
Tata Motors’ first-quarter performance was in line with consensus estimates with the consolidated EBITDA margin down 7.9 percent (down 646 bps QoQ), the brokerage said.
“We believe continued market share gains in the domestic PV business, CV upcycle and Tata Motors' delivery on FCF generation would be key monitorable for investors,” it said.
The brokerage has a ‘buy’ rating on the stock with a target price of Rs 513.
Motilal Oswal
The brokerage has a 'buy' rating on the stock with a target price of Rs 400.
With softening of headwinds, Tata Motors would see a triple benefit of macro recovery, company-specific margin drivers, and leverage in JLR and India businesses, the brokerage said.
The issue of semiconductor shortage is impacting its ability to meet emission compliance. To achieve compliance, it would need higher volumes, it said.
UBS
UBS has a ‘neutral’ call on Tata Motors, with a target price of Rs 320, lower from the earlier target of Rs 350 given the lack of a strong EV pipeline at JLR and rising competition intensity. It said that while the company’s India business is in line with estimates, JLR’s margins are weak.
The brokerage remains positive on India’s passenger vehicle demand as Tata continues to gain market share in this segment.
At 11:10 am, the stock was trading half a percent higher at Rs 294.55 on BSE.