Tata Motors slips 5% on Q2 earnings miss; brokerages divided on outlook

Shares of Tata Motors slipped 5 per cent to Rs 409.30 on the BSE in Thursday’s intra-day trade after the auto major reported higher-than-expected loss at a consolidated level for the quarter ended September (Q2FY23) when compared with the corresponding period last year due to semiconductor woes.

In Q2FY23, Tata Motors’s net loss narrowed to Rs 945 crore from Rs 4,442 crore in the year-ago quarter. The Street had estimated the company's net losses to shrink to Rs 655-755 crore. The company’s consolidated revenue grew 29.7 per cent year on year at Rs 79,611 crore. Earnings before interest, taxes, depreciation, and amortization (EBITDA) margins improved 130 bps YoY to 9.7 per cent.

The company saw its revenue, profitability, and cash flows improve despite lower-than-planned volumes due to chip supply, Tata Motors said in an investor presentation.The company’s UK subsidiary, Jaguar Land Rover (JLR), faced semiconductor shortage that dented its volumes.

On outlook, Tata Motors said the demand continues to remain strong, however will remain a key monitorable in wake of global uncertainties. Improving chip supply and cooling commodity prices will aid revenue and margins recovery and hence aim to deliver strong improvements in EBIT and free cash flows in H2 FY23, the company said. READ MORE

JLR is continuing to focus on signing long term partnership agreements with chip suppliers which is improving visibility of future chip supply. Production and sales volumes are expected to improve with positive profit margins and cashflow expected in the second half of FY23 and free cashflow is expected to be near breakeven for the full financial year, Tata Motors said.

However, ICICI Securities believe this commentary is below Street expectations with stock expected to open negative despite fundamental levers for better operational performance in its Indian business. The only solace was the company finally securing long term semi-conductor supplies, which could support volumes in CY23E.

Tata Motors should witness a gradual recovery as supply-side issues ease (for JLR) and commodity headwinds stabilize (for the India business). It will benefit from a macro recovery in India, company-specific volume and margin drivers, and a sharp improvement in FCF and leverage in both JLR as well as the India business, Motilal Oswal Financial Services said in result update.