CLSA maintains ‘sell’ call on Tata Motors

CLSA continues to maintain a sell call on Tata Motors, so it has been bearish on Tata Motors for a while. CLSA had cut the target price marginally on the stock earlier; the target price was Rs 408 and now is Rs 392.

Their point is that JLR’s sales continue to be under a lot of pressure because of the semiconductor shortage that have hit production levels globally. So in the month of February alone, JLR’s retail sales were down to 28 percent, largely led by what is happening in the European market. So first, there was a semiconductor shortage which hit the European sales quite a bit -- sales were down about 38 percent in Europe. Now, the Russia-Ukraine war has caused many production units to shut down. Hence, demand could get hit further.

CLSA also has cut earnings estimates, factoring in higher commodity costs; it could be challenging for the company to pass on the commodity cost to consumers given that demand has been hit. The production too also getting hit on account of the semiconductor shortage. The volumes could disappoint further if the chip shorted situation worsens.