Tata Motors Q2FY22 Results: In line with estimates

Tata Motors Q2 Result

Loss continues: Tata Motor Ltd. reported a net loss of Rs 4,442 crore for the July - Sep 21 period. In Q1FY22, the company reported a net loss of Rs 4,451 crore. This is the third straight quarter the company has reported losses. The reason given for the losses was supply shortages and rising input costs.

Revenue decline: Even the revenue was lower sequentially. The revenue for Q2FY22 fell by 8% QoQ and stood at Rs 61,379 crore, higher than the analyst estimate of Rs 59,088 crore. The revenue increased by 14.7% compared to last year in the same period (Rs 53,530 crore).

EBITDA and margins decline: Earning Before Interest, Tax, Depreciation, and Amortization (EBITDA) declined by 21% QoQ to Rs 4,117 crore. The margin declined from 8.2% in Q1FY22 to 7.2% in Q2FY22.

Tata Motors India Update: The India business of the company reported a pre-tax loss of Rs 800 crore because of a semiconductor shortage and higher input costs. However, the revenue increased by 91% YoY, and EBITDA margins improved by 130 bps to 3.9%. The domestic car sales increased by 30.3% over the three months ended in June. 

Tata Motors India sold 1.62 lakh PV units in the second quarter of FY22, an increase of 50% sequentially. It is mainly because of the low base effect as the second wave severely impacted the sales in the Q1FY22.

JLR Update: The sales of the JLR business declined by 11.1% for the same reasons. JLR’s EBITDA margin in Q2FY22 shrank 380 basis points on year to 7.3%. The luxury carmaker reported a pre-tax loss of 308 million pounds sterling in the quarter ended September. JLR managed to generate a free cash flow of 664 million pound sterling in Q2FY22 as against its guidance of a 1 billion pound outflow.

Brokerage Outlook:

Jefferies on Tata motors: Buy, Target: Rs 625

• Q2 EBITDA fell 23% QoQ, pulled down by chip shortages at JLR, but in-line with estimates.
• JLR believes the worst of chip shortages are behind & volumes should gradually improve. It is seeing good demand, has a strong order book, next-gen Range Rover and Range Rover Sport launches should boost JLR volumes. 
• Demand recovery, market share gains & better margin should continue to help india business.

INDmoney Review:

Although Tata Motors has posted losses this quarter, the results were in line with estimates as semiconductor shortages have plagued the whole of the auto industry. However, some positives that are going to help Tata Motors turnaround are:

• Refocus programme is on track to deliver EUR 1 Billion in savings in FY22 (EUR 500mn delivered in H1) through a mix of market performance and investment savings. 
• JLR’s electrified powertrain contribution to volumes has risen to 66% (~11.2% BEV+PHEV) vis-à-vis 39% YoY; 
• Margins were tight due to high commodity prices in India but Tata Motors took a 2% price hike in the commerce vehicles segment in Oct’21.
• Tata Motors got a $1 billion investment deal from TPG and it plans to accelerate its domestic EV strategy after the first tranche of TPG payment in Q4FY22. Strong demand for EVs (Nexon EV has six-month waiting) and Tigor EV also qualified for FAME-II incentives further boost confidence.
• Recently launched model Punch received strong orders (8000+ deliveries in Oct’21).