Tata Motors hits lowest level since February 2016 on weak Q4 results

The stock plunged 8% to Rs 286, its lowest level since February 2, 2016 on the BSE in early morning trade

Tata Motors plunged 8% to Rs 286, its lowest level since February 2, 2016 on the BSE in early morning trade, after the Tata Group Company reported a consolidated net profit of Rs 21.75 billion against an average analysts estimates of Rs 42.30 billion for the March quarter (Q4FY18). The company’s profits for the March quarter nearly halved from Rs 43.36 billion in year ago quarter, due to higher expenses and a one-time impairment charge.

The consolidated income from operations at the firm rose to Rs 912.79 billion over Rs 787.46 billion in the year-ago quarter. The earnings are not strictly comparable due to the implementation of goods and services tax from July, after which the revenue from operations was reported net of GST.

Management expects a strong all-round performance in FY19, with improvement in volume and profitability. JLR EBIT margin target stands at 4-7% (vs 3.8% in FY18) between FY19-21, led by better scale, cost reduction efforts, ramp up of low cost Slovakia plant and reduction in forex losses. In comparison, Standalone EBIT margin target stands at 3-5% (vs 0.5% in FY18), led by better scale and cost reduction efforts.

Analysts at Emkay Global Financial Services remain positive on Tata Motors owing to continued volume momentum and impending margin triggers.

“We lower FY19E/FY20E consolidated EPS forecast by 12%/9% to Rs 35.2/Rs 44.5, primarily led by reduction in capitalization rate for product development costs. Our SOTP based target price works out to Rs 450 (earlier Rs 460), - we value Jaguar Land Rover (JLR) at 3x EV/EBITDA and standalone at 6x EV/EBITDA. Although FY20E earnings estimates have been pruned by 9%, there is only a marginal change of 2% in TP, as we apply valuation multiple on capitalization adjusted EBIDTA,” the brokerage firm said in result update.

At 10:22 am; Tata Motors was trading 6% lower at Rs 290 on the BSE, as compared to 0.36% rise in the S&P BSE Sensex. The trading volumes on the counter more than doubled with a combined 24.74 million shares changed hands on the BSE and NSE so far.