Tata Motors falls 12% in two days on disappointing Q3 results

The stock dipped 9% to Rs 441 in intra-day trade, extending its Tuesday's 3.5% decline on the BSE

Tata Motors dipped 9% to Rs 441 in intra-day trade, extending its Tuesday’s 3.5% decline on the BSE, after the country’s largest automobile company by revenue reported disappointing set of numbers for the quarter ended December 2016 (Q3FY17).

The consolidated net profit during the quarter under review plunged by 96% to Rs 112 crore due to a steep decline in profit at its overseas unit Jaguar Land Rover (JLR) and higher losses in domestic operations. The company had reported consolidated profits of Rs 2,953 crore in the third quarter (Q3) of FY16.

The company’s consolidated revenues during the quarter were down 4% to Rs 67,484 crore as against Rs 70,567 crore for the corresponding quarter last year.

“During the quarter, commercial vehicle segments of the Company witnessed demand shrinkage due to the demonetization – M&HCV segment witnessed major pressure with a fall of 9.0% Y-o-Y and LCV segment was overall flat,” Tata Motors said in a release.

However analysts still maintain ‘buy’ rating on the stock with target price between Rs 535 and Rs 560.

“We maintain Buy rating on Tata Motors with a price target of Rs 560 as against Rs 615 earlier, factoring in 3.5x and 5x FY19e JLR and standalone EV/EBITDA. Major regulatory overhangs, economic downturn in developed markets and adverse currency moves are major risks,” analyst at Antique Stock Broking said in Q3 result preview.

Reported JLR margin this quarter got impacted to the extent of around 450bps led by temporary incremental expense items which ideally should not recur in quarters ahead. Also, with management guiding realized forex hedge book losses to start coming down post Q1FY18, we believe JLR would face the risk of another weak margin quarter in Q1FY18 as seasonally it is a weak quarter, added report.

“The stock has seen a 14% correction in the last 3 months and we believe negatives are largely factored in. Any further correction would be an opportunity to accumulate the stock as volume growth for JLR remains strong with new launches. Retain BUY with target price of Rs 535 (vs Rs 600 earlier),” said analysts at Emkay Global Financial Services in result update.

At 09:39 am; the stock was down 7.3% at Rs 451 on the BSE as compared to 0.01% decline in the S&P BSE Sensex. A combined 15.07 million shares have changed hands on the counter during first half-an-hour of trade on the NSE and BSE.