CLSA factored in volume growth for the rest of FY20 as the base is turning benign.
Shares of Tata Motors rebounded nearly 3 percent intraday on July 26 after hitting a fresh nine-year low in early trade after a disappointing show in June quarter (Q1). Global brokerage houses are mixed in their opinion with CLSA cutting price target on the stock.
The scrip touched an intraday low of Rs 138.15, the lowest level since February 2010, but rebounded to day's high of Rs 148.25 which could be due to the positive commentary by the management. At 1031 hours, Tata Motors was quoting at Rs 147.90, up 2.46 percent on the BSE.
CLSA has a sell call on the stock and slashed price target to Rs 120 from Rs 140 per share after cutting FY20-21 EPS estimates by 9-31 percent as the company reported worst pre-exceptional loss-before tax in a decade.
Tata Motors, on July 25, posted a huge loss of Rs 3,698 crore in June quarter, dented by a disappointing performance by Jaguar Land Rover.
JLR reported a pre-tax loss of 395 million pound, compared to 264 million pound loss in the corresponding period of the last fiscal, on quarterly revenues that declined 2.8 percent YoY to 5.1 billion pound due to weaker market conditions.
Additional plant shutdown time and delays in WLTP (Worldwide Harmonised Light Vehicle Test Procedure) certification, resulting from Brexit contingency planning, also contributed to the lower sales and profits, JLR said.
It was a worse-than-expected loss at bottomline level as consolidated loss was estimated at Rs 2,127 crore and JLR loss at 236 million pound for the quarter ended June 2019, according to a poll conducted by CNBC-TV18.
Here is what brokerages said about Tata Motors post Q1 earnings:
Brokerage: Morgan Stanley | Rating: Equal-weight | Target: Rs 192 | Return: 33 percent
The global brokerage maintained its equal-weight rating on the stock with a target price at Rs 192, implying 33 percent potential upside from current levels.
Q1 results missed estimates as JLR margin dipped and negative cash flow drove the company's net debt higher.
The company maintained its FY20 margin guidance, but at the lower end of the range after Q1 show. While valuation is cheap, Morgan Stanley still awaits signs of a volume turnaround.
Brokerage: Jefferies | Rating: Buy | Target: Rs 200 | Return: 38 percent
The brokerage still has a buy call on the stock with a target price of Rs 200, implying a 38 percent potential upside from current levels.
Losses widened for Chery-JLR but the commentary on China improved with management expecting growth ahead. Standalone losses were lower-than-expected helped by sharp expansion in gross margin, but auto down-cycle in India should keep the domestic business under pressure.
JLR's Q1 EBITDA/EBIT disappointed even against muted expectations. Higher employee and warranty costs more than offset better gross margin.
Brokerage: CLSA | Rating: Sell | Target: Rs 120 | Return: 17 percent
The brokerage has a sell call on the stock as Tata Motors reported worst pre-exceptional loss-before tax in a decade. Margin pressure has been more intense than expected.
JLR and India businesses showed lower volumes and sharp margin contraction YoY. JLR believes China business is stabilising and expects resumed volume growth.
CLSA factored in volume growth for the rest of FY20 as the base is turning benign.
Concerns on India truck demand & competition are manifesting. Hence the brokerage reduced its FY20-21 EPS estimates by 9-31 percent.
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