Tata Motors Q3 Results: Should Investors Buy, Sell or Hold?

On Monday, i.e., 31 January 2022, Auto player Tata Motors posted a consolidated net loss amounting to Rs. 1,516 crores for the third quarter of FY 2022. During the same quarter previous year, the company had reported a net profit worth Rs. 2,906.5 crores.

Resultantly, Tata Motors share price fell over 3% during the early trade-in on 1 February 2022.

Go through the following to know whether investors should buy, sell or hold Tata Motors stock after this news.

What Do Brokerage Firms Say?

Jaguar Land Rover posted a consolidated loss of Rs. 4,441.6 crores in the previous quarter.

This is the fourth consecutive quarter during which Tata Motors has witnessed a loss. Continuous loss by this big player indicates the damage originating from the semiconductor shortage, which the global automotive industry is facing currently.

In total, the company has reported a consolidated operating profit of Rs. 7,400 crores along with a 460 basis point contraction in 10.2% margin.

Tata Motors will also publish its sales number for January 2022 soon.

Here is what various brokerage firms have to say regarding its stock after Tata Motors Q3 earnings result:

• Jefferies

Jefferies maintains a Buy rating on this stock. It also gives a price target of Rs. 635 a share. As per the brokerage firm, JLR has posted its highest gross-profit-per-vehicle in 10 years due to a better mix and easing of chip constraints.

The firm also said that the company’s business in India is likely to expand due to the demand revival, margin recovery and a robust PV (personal vehicle) portfolio.

During its previous trading session, shares of Tata Motors closed at Rs. 517.50, which is more by 4.04% or Rs. 20.10 on the BSE.

• Prabhudas Lilladher

The consolidated performance of Tata Motors is surprising with a 12.5% EBITDA margin. Moreover, production increased by 41%, indicating that chip supply from JLR is easing out. This is expected to improve even more in 2022.

This brokerage firm maintains a positive stance on the company and considers it a top pick due to the following reasons:

1. Personal vehicle business is likely to gain more market share led by portfolio expansion and new product setups.

2. Volume for commercial vehicles will benefit from freight rates, cyclical upturns and improving fleet utilisation.

3. New additions in Land Rover and a solid order book will drive FCF and benefit JLR.

That said, Prabhudas Lilladher maintains a Buy rating on Tata Motors at a target price of Rs. 632 a share.

• Sharekhan

According to this brokerage, Tata Motors is experiencing improvement in various business verticals, such as CV, PV and JLRs. During H2FY 2021, the company witnessed better operational efficiencies and increased volume growth backed by aggressive product differentiation, launches, investments and market positioning.

The company is expected to improve its operational performance further in 2022. Moreover, domestic commercial vehicles and personal vehicle demand is expected to remain strong due to anticipated launches.

Due to its strong all-around performance, Sharekhan expects that Tata Motors will become earnings positive in FY 23E. As a result, it will likely reach a PAT of Rs. 11,708 crores led by a 16.7% revenue CAGR from FY 21E to FY 23E.

As a result, the brokerage maintains a Buy rating on the firm at an unchanged price target of Rs. 610 per share.

Bottom Line

At 9:23 am on 1 February 2022, shares of Tata Motors were trading at Rs. 503.45 on the Bombay Stock Exchange. This is down by 2.71% or Rs. 14.05. Although the company is experiencing its share of headwinds, brokerage firms are pretty optimistic about its performance in the foreseeable future.

Frequently Asked Questions

1. By how much did Tata Motors’ consolidated revenues decline?

On 31 January 2022, Tata Motors stated that its consolidated revenues fell 4.5% YoY to reach Rs. 72,229 crores.

2. How much improvement in EBIDTA margin does Sharekhan expect for Tata Motors?

As per Sharekhan, the EBIDTA margin for Tata Motors is likely to increase by 120 bps to 13.4% in FY 2023E.

3. When and where was Tata Motors founded?

Tata Motors was founded in 1945 in Mumbai.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.