Tata Motors share price jumps over 8% today; stock rallies 78% since March, should you buy or sell?

Even as the company reported a consolidated net loss of Rs 8,443.98 crore on-year for the quarter ended June 30, 2020, most of the research and brokerage firms recommend to buy shares

Tata Motors shares surged over 8 per cent to Rs 113.40 apiece on BSE, after the company released April-June quarter results on Friday. Tata Motors stock has risen over 78 per cent since March, from a 52-week low of Rs 63.60 apiece. Even as the company reported a consolidated net loss of Rs 8,443.98 crore on-year for the quarter ended June 30, 2020, most of the research and brokerage firms recommend to buy Tata Motors shares, with a potential upside of up to 25 per cent. The company had posted a net loss of Rs 3,679.66 crore in the corresponding quarter of the previous fiscal. “We expect losses to gradually reduce in coming quarters and turn profitable only from 4QFY21. We have lowered our FY21E loss estimates by 8% to factor in faster JLR volume recovery and cost-cutting initiatives,” Motilal Oswal Financial Services said in a report. The brokerage firm iterated a buy rating with a price target of Rs 127 apiece.

Tata Motors shares were trading 4.97 per cent higher at Rs 109.90 apiece in noon deals, taking the total market capitalisation of the company to Rs 33,932.38 crore. In comparison, S&P BSE Sensex was ruling 1.07 per cent or 400 points down at 37,207.  “In the domestic market, due to BS6 transition and simultaneous impact from COVID-19, Tata Motors standalone margin declined from negative 4.4% in 4QFY20 to negative 26.2%,” said JM Financial Institutional Securities. “Recovery in standalone business stays contingent upon economic recovery as COVID-19 situation normalises, ability to plough back PV market share and scrappage policy,” it added. The brokerage firm has a ‘buy’ rating to the stock. It will take Tata Motors to 19.4 per cent to hit the price target of Rs 125 apiece, pegged the brokerage firm. 

The company admitted that the auto industry was deeply impacted by COVID-19 pandemic in the April-June quarter. “We have witnessed some green shoots emerging in the passenger vehicle segment owing to some pent up demand pre COVID-19, and are hopeful for a full recovery of the CV (commercial vehicle) industry by end of the fiscal year, with a gradual pickup of demand, aligned to the economic recovery,” Tata Motors CEO and MD Guenter Butschek said. Research and brokerage firm ICICI Securities has also maintained a ‘buy’ rating to Tata Motors stock. The brokerage firm has revised its target price to Rs 131 from Rs 126 apiece earlier. “We believe the consensus is discounting a relatively low success rate for JLR to remain self-sustaining. The enhanced management focus on the continued delivery of cost savings coupled with prudent capital allocation are likely to rebuild investor confidence in JLR,” it added.

Brokerage firm Prabhudas Lilladher has maintained a ‘hold’ rating to the stock, with a revised target price of Rs 108, from Rs 100 earlier. “Tata Motors 1QFY21 consolidated EBITDA exceeded expectations beating JLR performance led by cost savings and better realizations. With China stabilizing post COVID and improvement in other global markets, JLR can see gradual volume recovery. Consistent delivery on cost savings and rationalized capex should help cash flows in challenging times,” it said in a report.