Tata Motors slides 4% on profit booking post December quarter results

Shares of Tata Motors slipped 4 per cent to Rs 498.55 on the BSE in Tuesday's intra-day trade on profit booking after the company pared its consolidated loss on quarter-on-quarter basis in the September-December 2021 (Q3FY22) as better availability of semiconductors helped Jaguar Land Rover (JLR) ramp up production.

At 09:30 am, Tata Motors traded 3 per cent lower at Rs 502, as compared to 1.2 per cent rise in the S&P BSE Sensex. In the past six months, the stock has rallied 71 per cent, as against 12 per cent gain in the benchmark index.

The Tata group commercial vehicles company reported a net loss of Rs 1,451 crore in Q3FY22, as compared to net loss of Rs 4,415 crore in the September quarter (Q2FY22). For the year-ago quarter, it had posted a net profit of Rs 2,941 crore.

Revenue from operations during the three-month period declined 4 per cent year-on-year (YoY) to Rs 72,229 crore as against Rs 75,653 crore in the corresponding period. Earnings before interest tax and depreciation and amortization (EBITDA) for the quarter came in at Rs 9,057 crore with corresponding EBITDA margin at 12.5 per cent, up 250 bps QoQ.

Tata Motors said the demand remains strong despite near term concerns from Omicron spread. The semiconductor supply situation is improving gradually whilst inflation worries persist. Over the last two years, the resilience of the business has improved, and it is now intrinsically stronger. With concerted actions in place to address the near-term supply and cost challenges, the company expects performance to improve further in Q4 FY22 and beyond.

Tata Motors Q3 results outperformed our expectations with sequential jump in EBITDA margins primarily driven by JLR amid favourable product mix. Gross margins expansion for the quarter was at ~320 bps QoQ, ICICI Securities said in a note.

The company guided for robust demand prospects (Jaguar Land Rover (JLR) order-book at 1.55 lakh units, up 30,000 units QoQ) which coupled with gradual improvement in chip availability to result in healthy profitability going forward. It continues to lead the domestic EV market with market share pegged at ~82 per cent and remains committed to its long term electrification goals at JLR, the brokerage firm said.

Near-term volume outlook remains uncertain due to semiconductor uncertainty for JLR, which would be compensated by a richer mix, thereby limiting the impact on EBIDTA. As production normalises, tailwinds from the RR launch followed by RRS and strong demand for Defender can surprise FY23E margins, analysts at Edelweiss Securities said.

The brokerage firm retains 'buy' rating on the stock with target price of Rs 616 per share. "India and JLR are on the cusp of a strong demand and product-cycle tailwinds. This should facilitate balance sheet improvement--key driver of our Braveheart call," it said.