Brokerages See Near-Term Concerns For Tata Motors After Q3 Earnings Miss

Shares of Tata Motors declined as much as 8.6 percent on Wednesday, making it a fifth straight day of losses for the homegrown auto major after its third quarter earnings missed street estimates by a wide margin.

Investors and traders took short positions in the stock after it reported a year-on-year decline of 96 percent in its profit for the quarter-ended December.

While most analysts admitted at being negatively surprised by the company’s performance, their reaction has been limited to a downward revision in price target while keeping rating on the stock mostly unchanged.

CLSA On Tata Motors

• Downgraded to ‘Sell’ from ‘Buy’
• Price target cut to Rs 405 a share from Rs 650 a share
• Expect margins to contract sharply for Jaguar Land Rover and India
• Expect hedging losses to continue at high levels
• See rising incentives due to demand pressures
• Cuts financial year 2018-19 earnings per share estimates by 25 to 31 percent

Citi On Tata Motors

• Retain ‘Buy’ rating, price target of Rs 660 a share
• Near-term concerns remain but margins guidance is strong in the medium-term
• Jaguar Land Rover’s model cycle seen to improve
• Healthy volumes growth, margins should aid free cash flows

Jefferies On Tata Motors

• Retains ‘Buy’ rating, price target of Rs 606 a share
• Jaguar Land Rover’s volume outlook remain strong but margins to remain in focus
• Average selling price benefitted considerably on account of GBP depreciation
• Higher than forecasted cost items, weaker mix led to margin contraction
• Management commentary on margins suggests an improvement but mildly so