Tata Motors Q1 Review: Analysts are optimistic about a rebound in Tata Motors Ltd.’s domestic business after the car-to-truck maker’s more-than-estimated loss in the first quarter.
Tata Motors Q1 Review
Tata Motors reported a loss of Rs 3,509 crore in the three months ended June. The second straight quarterly loss for the maker of Tigor hatchback came as local lockdowns during the second wave of Covid-19 disrupted business.
Analysts expect a reversal in fortunes for the Indian business and chip shortage to ease for Jaguar Land Rover after the ongoing quarter.
“India business should improve sequentially,” said Jefferies in the note. JLR, with its order book at the highest ever, will see chip shortage issues to worsen in the second quarter before easing in second half. “Despite the near-term headwinds, we expect a big turnaround at Tata over FY23-24.”
Of the 32 analysts tracking Tata Motors, 20 recommend a ‘buy’, seven suggest a ‘hold’ and five have a ‘sell’ rating, according to Bloomberg data.
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The stock rose more than 1% on Tuesday morning before paring some gains to trade 0.55% up as of 12 noon compared with a 0.11% increase in Nifty 50.
Here’s what brokerages have to say about Tata Motors after the first-quarter earnings:
Nomura
- Maintains ‘neutral’ rating with a target price of Rs 314, implying a upside of 7.2% from Monday’s close.
- India market to rebound quickly.
- Passenger vehicle order book remains strong and further model launches to support market share.
- JLR’s chip shortage issue to be largely sorted out by Q4FY22.
- Sharp shift in demand for electric vehicles could impact JLR’s sales as battery EVs constitutes only 6% of its sales.
Jefferies
- Maintains ‘buy’ rating with a target price of Rs 435, implying a upside of 48% from Monday’s close.
- India business to improve sequentially as demand is picking up and cost pressures to peak soon.
- Expects Ebitda margin for India business to improve starting Q2 as volumes recover.
- Despite good demand, severe chip shortage a concern for JLR.
- Despite the near-term headwinds, expect a big turnaround at Tata over FY23-24.
Motilal Oswal
- Maintains ‘buy’ rating, with a target price of Rs 400, implying a upside of 36.5% from Monday’s close
- Reasonable performance in a tough quarter.
- Looking beyond the near-term issues, expect good traction in the JLR and India businesses.
- Ebida margins for the CV business were largely flat and for the PV business came in at 4.1%
Emkay Global
- Maintains ‘buy’ rating, with a target price of Rs 400, implying a upside of 36.5% from Monday’s close.
- JLR supply issues to persist in near-term, but expect gradual easing in H2.
- Long-term (FY24/26) targets of margin and FCFs have been maintained.
- JLR’s sales upcycle is expected from H2 onward.
ICICI Direct Research
- Maintains ‘buy’ rating, with a target price of Rs 375, implying a upside of 28% from Monday’s close.
- Long-term drivers remain intact.
- Near-term blips aside, expect healthy 20.9% revenue CAGR over FY21-23E backed by 17% volume CAGR.
- Domestic CV recovery is likely to be gradual.
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