Tata Motors share price crashed after Rs 945 crore loss in Q2; check what analysts’ say

Tata Motors share price plunged on Thursday, after the company reported a Rs 944 crore loss in July-September quarter as supply chain constraints continue to hurt operational performance. Here are the major highlights from the Q2 earnings: 

Tata Motors Q2 earnings: Highlights

Loss narrows: Tata Motors’ consolidated loss for the period of July-September, 2022 was Rs. 944.61 crores. The automobile maker has been successful in reducing its losses by 79% compared to the corresponding quarter in FY22 and also on a sequential basis. In Q1 FY23, the loss made by the company was Rs. 5006.60 crores. So, the company has come a long way, but it is still higher than what the investors expected. 

Revenue: The revenue (consolidated) grew by 29.7% in the quarter that ended on 30th September 2022 compared to the corresponding quarter last year. It has mainly been driven by an increase in sales of Tata Passenger Vehicles, followed by the Jaguar Land Rover and Tata Commercial Vehicles segments. 

Jaguar Land Rover: The revenue for this segment increased by 35.9% on a YoY basis which is a result of an exceptional mix of different models. The pricing with wholesale volumes also helped in the growth. Recently, Jaguar Land Rover has been rated as ‘Low Risk’ ESG Risk by Sustainalytics. The segment of Tata Motors has scored 17.1 which is the 4th lowest rating amongst 74 automobile sector. 

Tata commercial vehicles: This segment witnessed a growth of 35.5% in the revenues YoY driven by domestic sales primarily. The number of vehicles sold in the Indian market (wholesale) in the July-September quarter was 93651 up by 19% compared to Q2FY22. While the Indian business grew in this period, the exports got affected due to geopolitical issues and recession fears. The exports for this segment dropped by 22% and only 6771 vehicles were exported in Q2FY23. The retail segment (domestic) grew by 23% YoY mainly resulting from higher volumes, and better realizations, however, it also got affected by foreign exchange and residual commodity inflation. 

Tata Passenger Vehicles: This segment added the most to the revenue as it grew by 71% YoY. The wholesale volume was high by 69% YoY and 10% sequentially which suggests a continuation of the strong momentum in this segment. 

Consolidated EBITDA increased: The EBITDA increased to 9.7% which is 130 bps higher than Q2FY22. Jaguar Land Rover added the most as it increased by 300 bps to 10.3% while Tata Passenger vehicles EBITDA decreased by 70 bps on a YoY basis. 

Outlook: While the revenue, and EBITDA went up in the quarter but it is still away from what was expected due to many constraints such as the supply of chips which affected the production. However, strong demand and new partnerships with suppliers of semiconductors can help the automobile maker to make a comeback as expected by the experts. 

The client order book stands at 205000 units as of 30th September 2022 which depicts the strong demand for Tata Vehicles in the market. Out of these total orders, 70% of it is for the top 3 models of Tata which are the New Range Rover, Defender and New Range Rover Sport. The production of the New Ranger Rover, and New Range Rover Sport also improved to 13537 units in Q2FY23 compared to 5790 units in Q1FY23. 

Share performance: Tata Motors' share price has been in trouble for the past year owing to the expanding losses in the previous quarters. The stock is down about 18% in the last one year.  

Analysts Call: After the Q2 FY23 results of Tata Motors, brokerage houses Jefferies, Motilal Oswal, Axis Capital and Emkay Global retain their ‘buy’ call for the automobile maker. However, Jefferies cut down on the estimated EPS for the next two financial years by 3% to 9% on the account of lower guidance and slower recovery. The brokerage house maintains the ‘buy’ call with the target price of Rs. 540 (upside 25% implication) on the ground of cyclical recovery and growth of franchises in India along with increasing leadership in the electronic vehicles space, and growing sales of premium models like Land Rover. 

Motilal Oswal maintained the ‘buy’ rating with a target price of Rs. 500 and a potential ROI of 15% based on the gradual recovery of the supply at the Jaguar Land Rover segment. The brokerage house expects residual commodity cost inflation to rever in the Q3 FY23 which would help ramp up Indian commercial vehicles and passenger vehicles segments of Tata Motors. However, Motilal Oswal also reduced the estimated EPS for the automobile giant.