Why brokerages are bullish on Tata Motors stock despite Rs 1,516-crore Q3 loss

Shares of homegrown auto major Tata Motors were trading lower today after the firm announced a loss of Rs 1,516 crore for the quarter ended December 2021.

The stock has fallen after four days of consecutive gain. The stock opened with a loss of 2.03% at Rs 507 today against the previous close of Rs 517.50 on BSE.

It further fell 3.66% to Rs 488.55 on BSE.

Tata Motors share is trading higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages. Tata Motors stock has gained 82.9% in one year and risen 6.07% since the beginning of this year.

Total 8.56 lakh shares of the firm changed hands amounting to a turnover of Rs 43.40 crore on BSE.

Tata Motors posts net loss of Rs 1,516 cr in Q3 amid chip shortage

The stock hit a 52-week high of Rs 536.50 on November 17, 2020 and a 52-week low of Rs 255.55 on February 1, 2021.

YES Securities has given a buy call with a target of Rs 597. "Tata Motors continues to remain our top pick, given its improving India franchise, early leadership in EVs in India, and JLR's aggressive cost controls. Standalone business is in sweet spot led by healthy cyclical recovery both in PV and CV whereas favorable product cycle to help drive  JLR  outperformance.  Despite  continued  outperformance,  TTMT  is  attractive  play among  OEMs.  We  raise  FY23/24  EPS  by  1%/5%  to  factor  in  better  ASPs  and  cost control and estimate revenue/EBITDA CAGR of 17%/19% in FY21-24E. We maintain BUY with target of Rs597 (v/s Rs 575 earlier)," the brokerage said. 

Motilal Oswal is bullish on the stock with a target of Rs 600 post its Q3 earnings.

"Tata Motors should witness a gradual recovery as supply-side issues ease and commodity headwinds stabilize (for the India business). It will benefit from: a) a macro recovery, b) company-specific volume/margin drivers, and c) a sharp improvement in FCF and leverage in both JLR as well as the India business. The stock trades at 13.4x FY24E consolidate P/E and 3.5x EV/EBITDA. We maintain our Buy rating, with a TP of INR600/share (Mar'24E-based SoTP," the financial services firm said.

The Tata Group's auto arm reported a loss of Rs 1,516 crore (attributable to shareholders) for the quarter ending December 31, 2021, as semiconductor shortages crimped the Indian automaker's ability to take advantage of the pandemic-driven demand for personal vehicles.

The firm had reported a net profit of Rs 2,906 crore a year earlier when an easing of coronavirus-related restrictions had led to a pick-up in sales. Sequentially, the automaker's loss narrowed from Rs 4,412 crore in the second quarter of this fiscal year.

Consolidated total revenue from operations declined nearly 5 per cent to Rs 72,229 crore versus Rs 756,53 crore from a year ago.

The consolidated EBITDA, or earnings before interest, taxes, depreciation, and amortization margin stood at 12 per cent.

In terms of outlook for the next quarter, the automaker said that the demand remains strong despite near term concerns from Omicron spread.

"The semiconductor supply situation is improving gradually whilst inflation worries persist. Over the last two years, the resilience of the business has improved, and it is now intrinsically stronger. With concerted actions in place to address the near-term supply and cost challenges, we expect performance to improve further in Q4FY22 and beyond," Tata Motors said.