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Tata Motors share price rallied 8 percent on Monday after the auto giant reported its June quarter earnings, with revenues down about 48 percent year-on-year (YoY) as global sales slumped. However, brokerages remained bullish on the stock as well as the management commentary.
Tata Motors share price rallied 8 percent on Monday after the Tata Group auto major reported its June quarter earnings, with revenues down about 48 percent year-on-year (YoY) as global sales slumped. Brokerages, however, remained bullish on the stock as well as the management commentary. The stock gained as much as 8.09 percent to Rs 113.50. At 9:39 am, the stock traded 6.55 percent higher to Rs 111.50 per share on the NSE.
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The consolidated net loss reported in the quarter ended June 30 was at Rs 8,443 crore as compared to the estimate of Rs 9,400 crore. Consolidated EBITDA (operating profit) came in at Rs 682 crore as compared to the estimated loss of Rs 2,600 crore. As a result, the first quarter of FY21 was not as disappointing as expected by the Street.
The management in the media release said that the retail demand will remain under-pressure as plant shutdowns have hit the profits. The outlook also remains uncertain for the year.
JLR's revenue slipped 44 percent to 2,859 million pounds, while EBITDA margins dipped to 3.5 percent v/s 4.2 percent YoY. "As the lockdowns ease, we will emerge from the pandemic with our most advanced product line-up yet, and with the financial and operating measures in place to return to long-term sustainable profit," said Dr Ralf Speth, the outgoing CEO of JLR.
He also added that all locations are operating with robust protocols and guidelines to ensure social distancing, hygiene and health monitoring, whilst still enabling production to increase in line with recovering demand.
Furthermore, CLSA in its brokerage report upgraded Tata Motors' share target price to 'buy' from 'underperform', by raising the target price to Rs 135 from Rs 103 apiece earlier.
It said, "Q1 was significantly driven by aggressive cost reduction measures. Both JLR and India's businesses have surprised on EBITDA and FCF (free cash flow) despite volume decline of 45-82 percent YoY."
The management continues to guide for positive FCF in Q2-Q4FY21 & FY22, added the brokerage.
Hence, in its report, CLSA has raised FY21-22 EBITDA forecasts by 4-6 percent, FCF to Rs 4,000 crore from Rs 3,000 crore. Renewed FCF focus coupled with current valuations reflects a positive risk-reward, added the report.