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Shares of Tata Motors shed about 10 per cent closing lower for a seven consecutive trading sessions (between May 28 and June 8) on a weak March quarter performance and worries about a slowdown in China. Although it gained a per cent on Tuesday, the stock is still down 27 per cent from its February high of Rs 605.
Share of China to overall volumes for JLR came down to 15 per cent in the March quarter, from 28 per cent in the first nine months of FY15 due to falling luxury car demand and the phasing out of imported Evoque and slower ramp up of the China-made version.
There are concerns, both on volumes and profitability. An analyst at a domestic brokerage says the move at the dealer level in China to form a union enabling them to negotiate better with OEMs (dealer incentives have also gone up) is a negative.
Analysts, however, expect the company to regain lost market share, as volumes of China-made Evoque ramps up and the company starts production of Discover Sport. Morgan Stanley analysts expect overall JLR wholesale volume growth to be at 17 per cent in FY16, against 9.5 per cent in FY15. This is on the back of new launches (XE, new XF, F-PACE) and pick-up in volumes in the China JV.Share of China to overall volumes for JLR came down to 15 per cent in the March quarter, from 28 per cent in the first nine months of FY15 due to falling luxury car demand and the phasing out of imported Evoque and slower ramp up of the China-made version.
There are concerns, both on volumes and profitability. An analyst at a domestic brokerage says the move at the dealer level in China to form a union enabling them to negotiate better with OEMs (dealer incentives have also gone up) is a negative.
On India operations, after a gap of five quarters, the company reported an operating profit of Rs 160 crore in the March quarter, compared with Rs 640-crore loss a year ago. Medium- and heavy-commercial vehicles are recovering, most of the demand is from the replacement side and there are no orders for new vehicles. The worst performing segment is the light commercial vehicles, which continues to be a laggard. While the passenger vehicle segment is performing well (Zest, Bolt) and M&HCV segment is expected to grow at a rate of 28 per cent over FY15-17, LCV recovery is likely to be in the second half of the current financial year, believe analysts at Spark Capital.
Despite the near-term concerns over JLR, according to Bloomberg, over 90 per cent of the analysts tracking the stock have a ‘buy’, with a consensus target price of Rs 611. Of this, about 85 per cent of the value is attributed to JLR. From the current levels, there is an upside of about 40 per cent. Investors could thus use the correction to accumulate the stock.
