Tata Motors tanks 5% post Q2 results. More downside ahead for stock?

Shares of Tata Motors plunged 5 per cent in Thursday's trade as the auto major disappointed Street with its September quarter results. It was a forgettable quarter for Tata Motors, said one brokerage.

Another brokerage felt it was an all round miss. A third brokerage was less critical. It said Jaguar Land over (JLR) realisations in fact surprised, but domestic profitability disappointed.

Brokerage targets for the stock still suggest 10-40 per cent potential upside for the stock over the prevailing price. On Thursday, the scrip fell 5.47 per cent to hit a low of Rs 409.30 on BSE. The scrip is now down 16 per cent year-to-date.

Reliance Securities values the stock at Rs 575. YES Securities sees it at Rs 532, Nuvama Institutional Equities at Rs 502 while Motilal Oswal finds it worth Rs 500. Kotak Institutional Equities has a fair value of Rs 450 on the stock.

Tata Motors on Wednesday reported a narrowing of consolidated losses to Rs 944.61 crore in the September quarter compared with Rs 5,006.60 crore in June quarter and Rs 4,441.57 crore in the same quarter last year. Revenue from operations jumped 30.46 per cent YoY to Rs 78,846.92 crore from Rs 60,435.92 crore in the corresponding quarter last year. Ebitda margin for the quarter came in at 9.7 per cent, up 390 basis points YoY.

The numbers, however, failed to meet Street estimates.

"Tata Motors turned in Q2FY23 Ebitda of Rs 6,200 crore, missing our estimate by 28 per cent as margins disappointed across businesses. Besides, Q3 volume ramp-up guidance for JLR is muted. The management indicated a marginal ramp-up in H2FY23 volume for JLR over H1," said Numava Institutional Equities.

The brokerage said JLR’s H1 performance is a classic case of a storm delaying the product cycle story to FY24E. It has cut its Ebitda estimates and, thus, target price. Kotak Institutional Equities has downgraded the stock to 'Add'. It expect a gradual recovery in JLR volumes, owing to recessionary concerns. "Also, market share loss in the CV segment and increased competitive intensity in PV segment will weigh on margin recovery," it said.

YES Securities has cut FY23 consolidated EPS estimates by 22 per cent to factor in for unfavorable currency and increased raw material inflation while it raised FY24E EPS estimate by 14 per cent to factor in for better product mix.

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