Tata Motors hits 5-month high; zooms 42% in four days on strong Q2 results

The stock gained 4% at Rs 180 in the intra-day trade on Thursday and was trading at its highest level since May 29, 2019.

Shares of Tata Motors hit a five-month high of Rs 180, up 4 per cent on the BSE on Thursday, zooming 42 per cent in the past four days, after it delivered a better-than-expected September quarter (Q2FY20) earnings show, with improvement in the operational performance at Jaguar Land Rover (JLR), its Britain-based luxury vehicle arm. The stock of the Tata Group's company was trading at its highest level since May 29, 2019.

In Q2FY20, Tata Motors’s consolidated net loss narrowed to Rs 217 crore, from Rs 1,049 crore reported in the year-ago period, while net revenue dropped nine per cent to Rs 65,432 crore. Driven by an improvement in JLR’s operational metrics, earnings before interest, tax, depreciation and amortisation (Ebitda) in the quarter rose 250 basis points (bps) to 12.4 per cent, the highest in 16 quarters.

The management hopes that measures announced by the government, as well as their commitments to significant front-end infrastructure investments, introduction of scrappage policy, and ensuring adequate liquidity to micro, small & medium enterprises (MSMEs) will improve the situation in the coming months.

The board approved preferential allotment / warrants to Tata Sons aggregating Rs 6,500 crore at Rs 150/share and implying dilution of 13 per cent. This will help deleverage the standalone balance sheet and is a positive signal for the stock sentiment.

“The progress on cost savings program and improvement in China is driving the much-needed margin improvement at JLR. India business, however, registered a big loss mainly due to sharp CV slowdown, though we think worst is over with large channel clean-up done”, analysts at JP Morgan said.

Going ahead, analysts at JM Financial Institutional Securities believe that in H2FY20, JLR can show an improvement in quarterly sales, while China JV sales will continue to decline albeit at a slower pace. 

"After witnessing a strong performance by JLR during Q2FY20, efficacy of ‘Project Charge’ is not under question," it said. The brokerage firm maintains ‘buy’ rating on Tata Motors with 12-month target price of Rs 230 per share.

At 01:08 pm, the stock was trading 3.7 per cent higher at Rs 178 on the BSE, as compared to a 0.59 per cent rise in the S&P BSE Sensex. A combined 57 million shares have changed hands on the counter on the NSE and BSE till the time of writing of this report.