Tata Motors gains 10% amid narrowed Q4 net loss, strong demand outlook

Shares of Tata Motors surged 9.8 per cent to Rs 408.6 on the BSE in Friday’s intra-day trade after the passenger vehicle major reported narrowing of consolidated net loss (attributable to shareholders of the company) to Rs 1,033 crore for the quarter ended March 31, 2022 (Q4FY22). It had reported consolidated net loss of Rs 7,605 crore in the year-ago period and Rs 1,516 crore in December quarter.

The company's consolidated revenue declined 11 per cent to Rs 78,439 crore as against Rs 88,628 crore in Q4FY21. Earnings before interest, taxes, depreciation, and amortization (EBITDA) margins contracted 320 bps year-on-year, while up 220 bps sequentially to 14.7 per cent.

Tata Motors said the demand remains strong despite geopolitical and inflation concerns. The supply situation is gradually improving, whereas commodity inflation is likely to remain at elevated levels. 'We expect performance to improve through the year as semiconductor supplies improve, and (we) aim to deliver strong EBIT improvement and free cash flows in FY23 to get to near net auto debt free by FY2024," the company said.

The management expects the global semiconductor shortage to continue through the next fiscal year with gradual improvement. However, the Covid-19 lockdowns in China as well as the new Range Rover Sport model changeover are expected to limit volume improvements in Q1 possibly resulting in negative EBIT and negative free cash flows in the quarter. "Volumes are expected to improve progressively thereafter, and we target achieving a 5 per cent EBIT margin and £1 billion+ positive free cash flow in FY23 for the full year,” it said.

"Tata Motors should witness a gradual recovery as supply-side issues ease and commodity headwinds stabilize (for the India business). It will benefit from a macro recovery, company-specific volume and margin drivers, and a sharp improvement in FCF and leverage in both JLR as well as the India business," Motilal Oswal Financial Services said.

"Q4FY22 performance outperformed our expectations with QoQ jump in EBITDA margins a positive surprise. Gross margins decline for the quarter stood at ~150 bps QoQ however margin outperformance was largely due to savings realised in other expense which declined ~310 bps QoQ (operating leverage gains). The company guided for robust demand prospects (JLR order-book at 1.68 lakh units, up 13,000 units QoQ) coupled with healthy profitability going forward. It continues to lead the domestic EV space with market share pegged at ~87 per cent during FY22 and remains committed to its long term electrification goals at JLR," ICICI Securities said in a note.

However, in the past three months, Tata Motors has underperformed the market and has fallen 20 per cent, as compared to 8 per cent decline in the S&P BSE Sensex.