Q1 Results: Analysts Cut Target Price For Tata Motors As JLR Woes Linger

Most analysts cut their target price for Tata Motors Ltd. as a bleak demand in India and falling sales of its luxury brand Jaguar Land Rover Automotive Plc. led to widening of the automaker’s losses in the quarter ended June.

The company’s net loss widened to Rs 3,680 crore in the three months to June from Rs 1,862.7 crore a year ago, according to its exchange filing. That’s nearly twice the Rs 1,970-crore loss expected by a consensus of analysts tracked by Bloomberg.

Jaguar Land Rover contributes the bulk of Tata Motors’ profit, but global headwinds due to slowing sales in China, technology disruptions and rising cost of debt have impacted its competitiveness. Increased protectionism in the U.S. and uncertainty around Brexit only add to its woes.

Here are the five key takeaways from Tata Motors’ first-quarter results:

Here’s what analysts have to say about Tata Motors performance in the quarter ended June:

Axis Capital Holdings

• Maintains ‘Add’, but cuts target price to Rs 151 from Rs 172 apiece.
• Jaguar Land Rover disappoints again; domestic business in line with estimates.
• Brexit concerns and trade war tensions in China make it tough to get constructive on the stock.
• Financial year 2021 will be a weak year for India due to commercial vehicle down-cycle.

Phillip Capital (India)

• Downgrades to ‘Neutral’ from ‘Buy’ and cuts target to Rs 161 from Rs 237 apiece.
• Despite slight recovery and improvement in China market, volume outlook remains hazy.
• Cost‐cutting aided profitability, but higher variable marketing spends will be a drag.
• Sees downside risk to the management guidance of 3‐4 percent EBIT margin due to Brexit and uncertain demand environment.

Emkay Global

• Maintains ‘Hold’, but cuts target to Rs 155 from Rs 192 apiece.
• A yet another forgettable quarter.
• Expects flat volume growth in FY20 and 5 percent growth in FY21.
• Expects margins to improve to 8.8 percent in FY20 and 11 percent in FY21 on cost cuts and volume improvement.

Morgan Stanley

• Maintains ‘Equal-weight’ with a target price of Rs 192 apiece.
• First-quarter results missed estimates as Jaguar Land Rover’s margin dipped and negative cash flow drove net debt higher.
• Maintains guidance on FY20 margin, albeit at the lower end of the guided range.
• Valuation is cheap, still await signs of a volume turnaround.

Edelweiss

• Maintains ‘Hold’, but lowers target to Rs 156 from Rs 167 apiece.
• Subdued quarter across businesses.
• Headwinds persist; cost-control critical.
• Demand outlook remains challenging.
• Expects free cash flow to remain negative for Jaguar Land Rover through FY21.

CLSA

• Maintains ‘Sell’, but cuts target by Rs 20 to Rs 120 apiece.
• Another big miss; margins contract for Jaguar Land Rover and in India.
• Jaguar Land Rover volume base turns benign but operational challenges persist.
• Concerns over Indian truck cycle and competitive intensity manifesting.

Citi

• Maintains ‘Buy’, and cuts target to Rs 200 from Rs 220 apiece.
• Tepid outlook overshadows poor results in the first quarter.
• Outlook and commentary mixed.