The company reported weak set of numbers as sales at Jaguar Land Rover, its UK-based subsidiary sputtered, following a one-time regulatory issue in China, uncertainty around Brexit and poor demand for diesel vehicles in the UK and Europe.
Consolidated EBITDA margin came in at 8%, down 39bps YoY and around 180bps lower then analyst estimates.
Analysts, however, optimistic on the Tata Motor's India business has given the sharp turnaround in the passenger vehicles (PV) business and believe the structural demand drivers are in place for the commercial vehicles (CV) business notwithstanding a temporary near-term impact on demand due to change in axle load norms.
“Given that the impact of higher incentives in China and dealer stocking is expected to fade away, the reduction in import duties in China will drive demand going ahead. We have factored in a volume CAGR of 7% for FY18-20e for JLR
keeping an EBIT margin of 3.5%/5% for FY19/20e respectively which is on the lower side of management guidance of 4%-7%. On the domestic business we are factoring in a volume CAGR of around 20% over FY18-20e and expect the EBITDA margins to improve by 410bps to 9.8% by FY20e on the back of strong volume growth and turnaround in PV segment profitability,” analysts at Antique Stock Broking said in result review. The brokerage has ‘buy’ rating on the stock with a 12-month price target of Rs 406 per share.
Analysts Elara Capital said, the retail growth in Q1FY19 though has been impressive at 6% YoY, higher than FY18 retail growth of 2%.
“We expect wholesales to bounce back especially in 2HFY19 and expect FY19E volume growth at +5.5% led by new launch ramp-up (RR and RR Sport order backlog of 2 months) and China recovery. This should boost margins at JLR
from current troughs,” the brokerage firm said with ‘buy’ rating on stock and target price of Rs 346.
Analysts at Emkay Global Financial Services also remain positive on Tata Motors
owing to positive volume momentum and impending margin triggers.
volume is expected to grow at 7% CAGR over FY18-20E, driven by aggressive launches (Velar in Q2FY18, RR/Sport variants in H2FY18, XEL in H2FY18, Epace in Q4FY18, Ipace in Q1FY19) and promising growth prospects in China. JLR margin is expected to expand by 140bps over FY18-20E, led by better scale, lower forex losses and cost reduction efforts,” the brokerage firm said in result update with ‘buy’ rating on the stock and target price of Rs 420 per share.
At 09:50 am; Tata Motors
was trading 2.8% lower at Rs 257 on the BSE, as compared to 0.13% rise in the S&P BSE Sensex. A combined 15.44 million equity shares changed hands on the counter on the BSE and NSE.
Tata Motors DVR was down 3% at Rs 140, after hitting 52-week low of Rs 137 on the BSE in intra-day trade so far.