Tata Motors surges 8% on better than expected JLR wholesales in Q4

Tata Motors' wholesales of 107,386 units at JLR for Q4FY23, comes as a positive development as, during the last call, the company had guided for wholesales at over 80,000 units

Shares of Tata Motors and Tata Motors DVR (Differential Voting Rights) surged up to 8 per cent on the BSE in Monday's intra-day trade after Tata Motors reported an 8 per cent year-on-year (YoY) increase in its global wholesale vehicle sales business, including Jaguar Land Rover (JLR), at 361,361 units in the March quarter of FY2023 (Q4FY23).

In a regulatory exchange filing, the company informed that it sold 107,386 units of JLR at wholesale level for Q4FY23 (including China JV), up around 16 per cent quarter on quarter (QoQ), while retail sales were 102,889 units, up 21 per cent QoQ and 30 per cent YoY, with current orderbook at 2 lakh units.

Following the development, shares of Tata Motors surged 8 per cent to Rs 472.30, hitting an over six-month high on the BSE. The stock was trading at its highest level since September 2022. Shares of Tata Motors DVR, too, soared 8 per cent to Rs 235.45. In comparison, the S&P BSE Sensex traded flat (up 0.04 per cent) at 59,858 at 09:35 am.

Further, the company informed that the positive free cash flow (FCF) is expected to be over £800 million (Rs 8,142 crore) in the fourth quarter (Q4FY23) and over £500 million (Rs 5,088 crore) positive for the full year (FY23).

"For Q4FY23, Jaguar wholesales were at 15,499 units, while Land Rover wholesales were at 91,887 units. This comes as a positive development as, during the last call, the company had guided for wholesales at over 80,000 units. With this reading of 107,386 units, it has vastly surpassed estimates," ICICI Securities said in a note.

Also, the company has outperformed its earlier guidance of being just breakeven at FCF level by reporting over £500 million (Rs 5,088 crore) as free cash flow for full year (FY23), the brokerage firm said.

Analysts at ICICI Securities have a 'BUY' rating on Tata Motors with a target price of Rs 530 per share due to JLR's progressive volume recovery, healthy positive Ebit margin profile, and FCF visibility for FY24E, with fundamental drivers for healthy growth in domestic operations.

Dominant position in domestic electric-PV space with Nexon EV as its most popular product with Harrier EV and Sierra EV slated for launch in CY25, coupled with the debut of Altroz & Punch CNG (twin cylinder) in Auto Expo. JLR also set to embrace the EV trend with Jaguar going all-electric by 2025, the brokerage firm had said in Q3 result update.

Meanwhile, Motilal Oswal Financial Services said.that all three businesses of Tata Motors are in a recovery mode. While the India CV business will see a cyclical recovery, the India PV business is seeing a structural recovery. JLR is also witnessing a cyclical recovery, supported by a favorable product mix. However, supply-side issues may delay the recovery process.

"While there will be no near-term catalysts from the JLR business, the recovery in the India business (~50 per cent of SoTP) will continue. The stock trades at 16.9x/13.7x FY24E/FY25E consolidated EPS, and 4x/3.4x FY24E/FY25E consolidated EV/EBITDA," the brokerage firm said. It has a 'Buy' rating with a target price of Rs 525 (Mar’25 SOTP).

The stock has galloped as much as 18 per cent in the last six trading sessions, and, in the process, has surpassed the key moving averages on the daily time-frame. 

In fact, at present, the stock trades above the higher-end of the Bollinger Bands on the daily chart, implying that that the bias is likely to remain bullish as long as the stock holds above Rs 455.

On the weekly scale, the stock is attempting to cross the trend line resistance at Rs 460, followed by top-end of the Bollinger Bands at Rs 469. Sustained trade above the same can help the stock rally towards the Rs 500 - Rs 510 levels on the upside, suggests the monthly chart.

On the flip side, in case, the stock dips below today's opening gap of Rs 452, it could correct up to Rs 435-odd levels, in order to fill the gap.

(With inputs from Rex Cano)