Tata Motors Q3: Losses continue for the 4th straight Quarter

Tata Motors Q3
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Loss continues: Tata Motor Ltd. reported a net loss of Rs 1,451.05 crore for the Oct-Dec period. In Q2FY22, the company reported a net loss of Rs 4,442 crore. Last year during the same period the company reported a net profit of Rs 2,941.48 crore. This is the fourth straight quarter the company has reported losses. The reason given for the losses was supply shortages and rising input costs.

Revenue decline: The revenue for Q3FY22 fell by 4.52% YoY and stood at Rs 72,229.29 crore from Rs 75,653.79 crore in the year-ago period. The revenue is in line with the street estimate of Rs 72,760 crore. Sequentially, the revenue is up by more than 20%. 

EBITDA and margins: Earning Before Interest, Tax, Depreciation, and Amortization (EBITDA) stood at Rs 7400 crore and 10.2%, down 460 basis points. The Operating margin declined from 15% in Q3FY21 to 9.15% in Q3FY22. The margins were impacted by the increase in commodity prices.

Tata Motors India Update: The India business of the company reported a pre-tax loss of Rs 834 crore because of a semiconductor shortage and higher input costs. However, the revenue increased by 43.3% YoY to Rs 21,000 crore. EBITDA margins declined by (220) bps to (1.7)%. The domestic car sales increased by 30.4% to 200,212 units.

PV business continued its turnaround journey and strengthened its double-digit market share with the highest sales in any calendar year since inception. EV sales witnessed a new peak of 5,592 units in Q3FY22.

JLR Update: JLR’s EBIT margin for Q3FY22 was  1.4% and free cash flow was £164 million reflecting improvements in wholesales, mix, and cost-efficiency. The revenue for the Oct-Dec period was £4.7 billion, up 22% from Q2FY22. Demand remains strong with a record order book of almost 155,000 vehicles, up 30,000 units from Q2 reflecting strong demand for the New Range Rover, with deliveries for the model to start later in Q4FY22.

Tata Motors Q3 Results Review:

Tata Motors has reported Q3 results below street estimates. It posted losses again in this quarter as semiconductor shortages have plagued the whole of the auto industry. The outlook remains positive as demand remains strong despite near-term concerns from Omicron spread. The semiconductor supply situation is improving gradually whilst inflation worries persist.

For JLR, the Company is also engaging with first-tier suppliers and directly with the chip manufacturers to secure supply longer-term. With this gradual expected improvement, Jaguar Land Rover expects Q4 profits to improve from Q3 with positive cash flow.

For Tata Motors India business, the company continues to unlock the supply bottlenecks by working proactively with vendor partners. The company expects a sequential improvement in overall performance to continue in Q4FY22 and beyond. It targets to be EBIT and free cash flow positive in Q4FY22. The road ahead looks good for Tata Motors.

Brokerage Outlook 

ICICI Direct has a BUY call on Tata Motors with a target price of Rs 578. The period for investment is three months. The stock closed 4.05% up at Rs 517.50 per share on Monday afternoon.

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