Tata Motors skids 4% on poor JLR performance but brokerage firms still bullish

Shares of Tata Motors fell as much as 4 percent on Thursday after the company's loss during April-June widened on poor performance by luxury car maker arm Jaguar Land Rover (JLR).

However, the scrip came off its initial day's low and was trading 1.4 percent lower at Rs 437.55 as of 10:03 am on the BSE.

JLR tax charge widens Tata Motors loss to Rs 5,007 crore

JLR revenues were impacted by supply changes, including semiconductor shortages, slower than expected ramp-up of the New Range Rover and New Range Rover Sport production and China lockdowns.

The loss in JLR primarily reflects lower wholesale volumes with a weaker mix, as well as unfavourable inflation and currency and commodity revaluation. Additionally, Tata Motors said in an earnings press release that the operating margin was due to lower volumes and an unfavourable mix.

Jefferies said weak JLR earnings resulted in a fall in EBITDA, but the company expects performance to improve significantly from the next quarter. However, the foreign brokerage firm reduced its earnings per share estimate for FY23 by 24 percent.

Nomura noted the earnings miss in the first quarter of FY23 and added that debt reduction was a key driver for the stock's performance going ahead. The brokerage firm also said improved chip supply would help JLR.

Meanwhile, CLSA said: "We take comfort from JLR’s growing order backlog and strong domestic business."

Recovery in the medium and heavy commercial vehicles segment is on track, and the automobile company is expected to ramp up the passenger vehicles segment further.

Market share in the Electric Vehicle (EV) space has risen marginally in Apr-Jun from FY22 (Source: Investor Presentation)

Market share in the passenger vehicle space has risen to 14.3 percent in Apr-Jun (Source: Investor Presentation)

Market share has fallen to 42.5 percent in Apr-Jun (Source: Investor Presentation)

“We expect demand to remain strong despite worries on inflation and geo-political risks while the supply situation is expected to improve,” Tata Motors said. The company added that cooling commodity prices are expected to aid improvement in underlying margins.

Tata Motors aims to deliver strong improvements in EBIT and free cash flows from the second quarter onwards to get to near net auto debt free by FY24.

For JLR, the carmaker expects chip supply to gradually improve. It continues to expect significant improvement in volumes and profitability over the balance of the financial year ending March 31, 2023.