scorecardresearchTata Motors Q4 Results: JLR disappoints, India business shines; shares rise 9%

Tata Motors Q4 Results: JLR disappoints, India business shines; shares rise 9%

Updated: 13 May 2022, 11:04 AM IST
TL;DR.
  • Motilal Oswal cut its FY23/FY24 consolidated EPS estimate by 12% each to account for a volume cut in JLR due to the lockdown in China and slower improvement in semiconductor supplies, cost inflation, and translation impact of the appreciation in the INR against the GBP on JLR consolidation.
FILE PHOTO: Tata Motors logos are pictured outside their flagship showroom in Mumbai May 28, 2013. Picture taken May 28, 2013. REUTERS/Vivek Prakash/

FILE PHOTO: Tata Motors logos are pictured outside their flagship showroom in Mumbai May 28, 2013. Picture taken May 28, 2013. REUTERS/Vivek Prakash/

Shares of Tata Motors jumped over 9% on the BSE in morning trade on May 13, 2022. The shares of the company were trading at 406.80 per share at 11.04 am. 

Tata Motors said its consolidated net loss for the fourth quarter ended March 31, 2022 narrowed to 1032.8 crore as against 7605 crore in the same quarter of last year. It's revenues, too, declined by 11.49%, at 78,439 crore.

Tata Motors' marquee brands Jaguar and Land Rover (JLR) reported a 27% drop in revenues while its commercial vehicle business in India registered strong growth.

The company's passenger vehicle saw its highest ever quarterly revenue of 10,500 crore while its electric vehicle (EV) business saw market share rise to 13.4% at over 9000 cars sold.

Jinesh Gandhi, Vipul Agarwal and Aniket Desai of Motilal Oswal, in a report dated May 13, 2022 said, “JLR mix deteriorated due to a runout of the old Range Rover, whereas the recovery in India businesses was strong. While demand for JLR remains strong, there are near-term pressures due to COVID-related lockdown in China and run out of the RR Sport. The India business should benefit from a continued demand recovery in CVs and production ramp-up in PVs.”

The trio have a ‘buy’ rating on the stock with a 30% upside target of 485 per share. As on May 12, the company was trading at 372 per share.

The JLR conundrum

Marred by the global semiconductor shortage, Tata Motors expects semiconductor supplies to gradually improve, though shortages will continue in FY23. The company said its first quarter of the current fiscal year will be impacted by COVID-related lockdowns in China as well as a runout of the old RR Sport, which will result in lower volumes.

Motilal report further said, “JLR’s order book rose to 168,000 units (v/s 155,000 in 3QFY22), driven by strong demand for the new Range Rover (46,000 units) and Defender (41,000 units). It will also have to refill channel inventory (dealer and JLR) to 90,000 units over the next few quarters from 66,000 units at present.”

The India business

Tata Motors believes the trucker’s sentiment index is improving across segments. Fourth quarter saw a return of retail customers as well as recovery in the Bus segment, driven by the opening up of schools and offices. Finance availability for commercial vehicles retail customers improved, with freight rates firming up. Despite uncertainties, the business sentiment continues to remain positive, with increasing fleet utilization and freight rates.

What lies ahead

The trio said, “Tata Motors should witness a gradual recovery as supply-side issues ease and commodity headwinds stabilize (for the India business). It will benefit from: a) a macro recovery, b) company-specific volume and margin drivers, and c) a sharp improvement in FCF and leverage in both JLR as well as the India business.”

 

First Published: 13 May 2022, 09:11 AM IST