Tata Motors rallies 11% as domestic PV sales nearly double in Jan

Shares of Tata Motors rallied 11 per cent to Rs 311 on the BSE in Tuesday's intra-day trade after the company retained positive momentum and reported a 15 per cent month-on-month (MoM) and 94 per cent year-on-year (YoY) growth in domestic passenger vehicles (PV) sales at 26,978 units during the month January 2021. 

The stock of Tata group commercial vehicles (CVs) company was trading at its highest level since June 2018.

Total CVs sales during the month remained flat at 32,909 units on MoM basis while declined 3 per cent on a YoY basis. Tata Motors total sales in the domestic & international market for January 2021 stood at 59,959 units, compared with 47,862 units during January 2020, the company said in a press release.

PV segment demand was healthy amid preference for personal mobility. Tata Motor's outperformance continues amid strong consumer response to its new forever series (Nexon, Altroz among others).

In the past one month, Tata Motors has outperformed the market as its shares zoomed 67 per cent on improved operational performance. In comparison, the S&P BSE Sensex was up 3 per cent during the same period.

For the October-December quarter, Tata Motors posted a sharp 67 per cent YoY growth in net profit at Rs 2,906 crore. The company, which owns Jaguar Land Rover (JLR), returned to net profit after three consecutive quarters of loss.  The better-than-expected net profit was led by strong operational performance both at the standalone and JLR businesses.

Consolidated revenue for the said quarter came in at Rs 75,654 which was higher than consensus estimates that had pegged the same at Rs 72,292 crore. The operating profit margins expanded by 540 basis points to nearly 15 per cent on higher operating leverage, improving product mix, geographic markets and lower other expenses.

Analysts at Motilal Oswal Financial Services said Tata Motors saw continued volume recovery in both businesses in Q3FY21. In addition to this factor, the benefit of the mix at JLR, certain favourable reversals at JLR, and cost-cutting initiatives came together to deliver good all-round performance and QoQ debt reduction.

Continued mix improvement in JLR and India, along with overall tight cost and capex control, would drive sharp improvement in operating performance and debt reduction, they added.

"Tata Motors would see the triple benefit of macro recovery, company-specific volume/margin drivers, and a sharp improvement in FCF and leverage in both JLR as well as the India business. While Brexit-related headwinds are behind us, the near-term risk of volume disruption - due to the possibility of a second wave of COVID - in the EU and UK cannot be ruled out," the brokerage firm said in result update.