So far, the year has been unfavourable for Tata Motors' stock primarily because of the chip shortage issues and other prevailing headwinds in JLR's key markets - Europe and China.
The stock is down 18% year-to-date (YTD) against a 15% gain in the BSE Auto index and a 0.57% decline in the Sensex index.
For the September quarter of FY23, JLR's wholesale volume remained below estimates while the order book has improved slightly.
Brokerage firm Motilal Oswal Financial Services highlighted that JLR’s Q2FY23 wholesale volumes (ex-China JV) grew just 4% quarter-on-quarter (QoQ) to 75,300 units against the estimates of 88,500 units and guidance of 90,000 units. Wholesales continued to be adversely affected by chip shortages.
Order book as on September 30, 2022, grew to almost 2,05,000 units, up by nearly 5,000 units from June 30, 2022 level. Demands for the new Range Rover, new Range Rover Sport and Defender are particularly strong with orders accounting for over 1,45,000 units of the 2,05,000 units. JLR expects sales to improve over the remaining financial year as chip shortages ease, Motilal Oswal said.
Should you buy the stock now after the steep fall in stock prices? Are the fundamentals improving significantly to support its rise for the long term? What are the technical indicators saying?
We compiled the views of analysts and brokerage firms to find the answers. Here's what they said:
Brokerage firm: Motilal Oswal Financial Services
All three businesses of Tata Motors are in recovery mode. While the Indian commercial vehicle (CV) business will see a cyclical recovery, the India passenger vehicle (PV) business is in a structural recovery mode.
JLR is also witnessing a cyclical recovery, supported by a favourable product mix. However, supply-side issues will defer the recovery process. While there will be no near-term catalysts from the JLR business, the India business (nearly 50% of SoTP) will see a continued recovery.
"The stock trades at 16.3 times FY24E consolidated earnings per share (EPS) and 2.8 times P/B (price-to-book ratio). We maintain our buy rating, with a target price of ₹510 (premised on Sep’24E SoTP)," said the brokerage firm.
Brokerage firm: ICICIdirect
"We build a 14.3% consolidated sales CAGR for Tata Motors over FY22-24E along with improvement in margins to 14.1% levels by that time and a return to profitability at the PAT level," said the brokerage firm.
The company stays committed to its long-term vision of healthy profitability at JLR, positive free cash flow generation and consequent de-leveraging of the balance sheet.
"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) as well as big order wins in the electric-bus space domestically," said the analyst.
Analyst: Abhishek Jain, Head of Research, Arihant Capital
The increase in chip availability will help the company which already has a first-mover advantage. Tata’s latest EV launch Tiago has got a good response and Nexxon is also among the best-selling models in the last few months. So, the domestic side of Tata Motors is performing well.
"With the raw material pressure easing up and businesses in China expected to pick up in the next 6-9 months, we expect some growth for Tata Motors. The Europe and UK business, which contributes to a big chunk of Tata Motors, will likely remain under pressure in the near future," said the analyst.
"In the short term, we do not see any major upside, but one can add in tranches, keeping at least a two-year time horizon for the investment," the analyst said.
Analyst: Jigar S. Patel, Senior Manager - Equity Research, Anand Rathi Share and Stock Brokers
The free fall started from mid-August 2022 to September 2022 which resulted in a 20% decline in price. On a daily scale, the counter has formed a bullish bat pattern with a potential reversal zone of ₹390-395 along with double bottom near mentioned potential reversal zone which is adding more confirmation for early reversal in the counter.
Daily RSI (relative strength index) has formed a complex structure near the oversold zone along with the MACD-made bullish cross (4 hours scale ) which further confirms the upside in the counter.
"One can buy in small tranches at current levels and buy another tranche at around ₹385 levels (if tested). The upside is expected till ₹440 and support is seen around ₹370," said the analyst.
Analyst: Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher
The stock has witnessed a decent correction from the ₹500 level in recent times and has attained the support zone of ₹385-390 levels from where it has shown signs of bottoming out.
"With some consolidation witnessed, we can expect some pullback in the coming days. The RSI is hovering near the oversold zone which is finding some consolidation and indicating some signs of improvement," said the analyst.
"A further rise above ₹418 would further strengthen the bias and can anticipate further rise till ₹450-460 levels. We suggest maintaining the stop loss of ₹380 and buying the stock for an expected target of ₹450-460 in the coming days," said the analyst.
According to a MintGenie poll, an average of 30 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.