Tata Motors dips 6% on profit booking post March quarter results

The stock has outperformed the market by gaining 15 per cent in the past two weeks, as compared to a 4 per cent rise in the benchmark index S&P BSE Sensex

Shares of Tata Motors dipped 6 per cent to Rs 312.95 on the BSE in intra-day trade on Wednesday on account of profit booking in the counter even as the firm reported a strong operational performance for the quarter ended March 2021 (Q4FY21), led by its UK subsidiary Jaguar Land Rover (JLR) and its India business, and narrowing of consolidated loss, which was mainly on account of exceptional items.

The stock of the Tata group-owned global automobile manufacturer has outperformed the market by gaining 15 per cent in the past two weeks, as compared to a 4 per cent rise in the benchmark index S&P BSE Sensex till Tuesday.

In Q4FY21, Tata Motors reported a net loss of Rs 7,605 crore as against a net loss of Rs 9,894 crore in the corresponding quarter a year ago. Excluding the exceptional items, the firm's revenue, Ebitda (earnings before interest, taxes, depreciation, and amortisation), and profit before tax (PBT) were higher than Street estimates.

The loss was mainly on account of asset write-downs and restructuring costs of Rs 14,994 crore with respect to JLR's Re-imagine strategy. The net exceptional expenses were Rs 13,347 crore after considering Rs 2,000 crore of write-backs in the India business.

Consolidated net sales were at Rs 88,628 crore, up 41.8 per cent year-on-year (YoY) on the back of a 106 per cent YoY rise in India revenue (volumes up 89 per cent) and a 20.5 per cent rise in JLR sales (volumes up 7.5 per cent YoY). Consolidated margins came in at 16.5 per cent during the quarter under review, down 37 basis points (bps) sequentially.

“Tata Motors Q4FY21 performance was ahead of our estimates on the margins front and was attributable to savings in other expenses, with 15.3 per cent margins at JLR being the highlight. Notably, the company delivered on outlined cost, cash savings target at JLR under Project Charge+ for FY21 and overperformed similar India target of Rs 6,000 crore by Rs 3,300 crore. The free cash flow (FCF) generation continued apace in JLR (£729 million) and in India (Rs 2,900 crore). While commentary on near term demand is cautious across geographies, retention of greater than 4 per cent EBIT margins guidance at JLR in FY22E is encouraging,” ICICI Securities said in a note.

“Tata Motors performance in Q4FY21 was a mixed bag as the overall operating performance was in line. JLR’s performance was restricted by an adverse mix, despite a sharp beat in volumes. In a seasonally strong quarter, consolidated net debt fell Rs 7,300 crore YoY (down Rs 13,800 crore QoQ) to Rs 40,900 crore. Q1FY22 would be challenging for both businesses, though the outlook beyond that is positive,” Motilal Oswal Securities said in a results update.

Near term headwinds notwithstanding, Tata Motors would see the triple benefit of macro recovery, company-specific volume, margin drivers, and sharp improvement in FCF and leverage in both JLR as well as the India business, the brokerage firm added.