Mumbai: Shares of Tata Motors Ltd on Thursday plunged nearly 8% to hit an over 27-month low as many brokerages reduced the stock’s target price after the company reported a 50% drop in its consolidated net profit.
Tata Motors on Wednesday said its consolidated net profit fell to Rs2,175.16 crore for the quarter ended 31 March, down 49.8% from Rs4,336.43 crore in the same period a year earlier as vehicle sales declined at its British unit Jaguar Land Rover (JLR) and its Indian operation reported a loss. Sales rose 15.9% to Rs91,279.09 crore from Rs78,746.61 crore last year same quarter.
In intraday trade, Tata Motors shares fell as much as 7.97% to hit a low of Rs284.70 a share—a level last seen on 12 February 2016. At 10.27am, the stock was trading 6.1% lower at Rs290.45 on BSE, while the Sensex was up 0.47% to 34,507.54 points.
“Near-term demand outlook for JLR remains challenging due to weakness in key markets of UK, Europe and US. For standalone business though outlook is strong helped by strong macro and likely improvement in market share trends. Undemanding valuation post steep correction makes risk-reward favourable in our view” said Jefferies India in a report to its investors.
The brokerage firm has maintained “buy” rating on the stock, but cut its target price to Rs440 from Rs510 a share earlier.
JLR posted a 3.8% year-on-year decline in sales to 172,709 units. Sales in Europe, including the UK, continued to decline, while sales growth in China slowed to 11%. The American market sprang a surprise with a 3.48% rise in sales to 36,325 units during the quarter.
JLR sales have taken a hit due to factors such as Brexit, adverse taxation on diesel cars in the UK and Europe, and market cyclicality in the US and UK
JM Financial Research has reduced its target price to Rs400 a share from Rs490 earlier. Kotak Institutional Equities has tweaked its target price to Rs445 from Rs465 earlier.
Kotak Institutional Equities expects that JLR to deliver 4% volume CAGR over FY2018-21E led by strong growth in China JV volumes due to localization of more models and launch of new models in CY2018.
“We remain positive on demand outlook for JLR in the long- term, supported by new launches, network expansion and capacity increase. Although, JLR growth in the near term would be subject to sales recovery in the US, their China JV has been witnessing strong volume growth. JLR margins would be supported by volume growth even as forex movements remain volatile”, said JM Financial in a report.
“India business growth momentum is on track and would get better as the CV recovery in domestic market gains further traction”, the report added.
Of the analysts covering the stock, 28 have a “buy” rating, 10 have a “hold” rating, while 2 have a “sell” rating, shows Bloomberg data.