Shares of Tata Motors slid 4% to Rs 498.55 on BSE during Tuesday’s intraday trading on earnings booking after the company cut its consolidated loss on a quarterly basis in September-December 2021 (Q3FY22 ) as better availability of semiconductors has helped Jaguar Land Rover (JLR) to speed up production.
As of 9:30 a.m., Tata Motors was trading down 3% at Rs 502, against a 1.2% rise in the S&P BSE Sensex. Over the past six months, the stock is up 71%, versus a 12% gain for the benchmark.
The Tata Group utility vehicle company reported a net loss of Rs 1,451 crore in Q3FY22, compared to a net loss of Rs 4,415 crore in the September quarter (Q2FY22). For the prior year quarter, it had posted a net profit of Rs 2,941 crore.
Operating revenue during the three-month period decreased by 4% year-on-year (YoY) to Rs 72,229 crore from Rs 75,653 crore during the corresponding period. Earnings before interest tax and depreciation and amortization (EBITDA) for the quarter came in at Rs 9,057 crore with a corresponding EBITDA margin of 12.5%, up 250 basis points QoQ .
Tata Motors said demand remains strong despite short-term concerns over the spread of Omicron. The semiconductor supply situation is gradually improving as inflation concerns persist. Over the past two years, the resilience of the business has improved and is now inherently stronger. With concerted actions in place to address near-term supply and cost challenges, the company expects performance to improve further in the fourth quarter of FY22 and beyond.
Tata Motors’ third quarter results exceeded our expectations with a sequential jump in EBITDA margins mainly driven by JLR in a favorable product mix. Gross margin expansion for the quarter was about 320 basis points quarter-on-quarter, ICICI Securities said in a note.
The company has been moving towards a robust demand outlook (Jaguar Land Rover (JLR) order book at 1.55 lakh units, up 30,000 QoQ units) which, coupled with gradually improving chip availability, translate into healthy profitability in the future. He continues to dominate the domestic EV market with a pegged market share of around 82% and remains committed to his long-term electrification goals at JLR, the brokerage said.
The near-term volume outlook remains uncertain due to semiconductor uncertainty for JLR, which would be offset by a richer mix, thus limiting the impact on EBIDTA. As production normalizes, tailwinds from the launch of the RR followed by the RRS and strong demand for Defender may surprise FY23E margins, Edelweiss Securities analysts said.
The brokerage firm retains the “buy” rating on the stock with a target price of Rs 616 per share. “India and JLR are poised to have strong demand and tailwinds in the product cycle. This should facilitate balance sheet improvement, a key driver of our Braveheart call,” he said.