Tata Motors surges 6%, hits over 4-month high on strong Q3 performance

Tata Motors will benefit from a macro recovery in India, company-specific volume/margin drivers, and a sharp improvement in FCF and leverage in both JLR and India ops, Motilal Oswal said in a note.

Shares of Tata Motors surged 6 per cent, hitting an over four-month high, of Rs 444.60 on the BSE in Friday’s intra-day trade as the company posted a consolidated net profit of Rs 3,043 crore in the third quarter of fiscal 2022-23 (Q3FY23), after reporting losses for seven straight quarters. The company had posted a net loss of Rs 1,452 crore in a year ago quarter.

The stock was trading at its highest level since September 16, 2022.

The healthy performance during the quarter was on the back of a strong order book, better semiconductor chip supply, tempered commodity prices, and a better product mix. The company’s total income jumped 22.9 per cent year-on-year (YoY) to Rs 89,618 crore in Q3.

In the October-December quarter, Jaguar Land Rover revenues stood at £6 billion, up 28 per cent compared with the same period last year, reflecting better supplies, strong model mix and pricing, Tata Motors said. Profit before tax in the third quarter stood at £265 million, against a loss of £9 million a year ago, it added. READ MORE

On outlook, Tata Motors said it remain cautiously optimistic on the demand situation despite global uncertainties. The company will remain vigilant on demand and its continued focus on profitable growth, improving semiconductor supplies and stable commodity prices will aid revenue growth, margin improvement and positive cash delivery in Q4 FY23, it said.

“The company continues to see strong demand for its vehicles. Wholesales in China during the quarter were impacted by lockdowns leading to dealer closures followed by high rates of staff absence as Covid-19 restrictions were relaxed,” Tata Motors said.

The situation is expected to recover in the fourth quarter with dealers open and staff absence closer to normal levels in January. The Refocus transformation programme is on track to deliver a target of £1 billion plus improvements in the year to help mitigate the impact of inflation, it said.

Tata Motors’ Q3FY23 operating performance was a beat, driven by strong mix benefits for JLR and lower discounts in the India CV business. JLR is seeing strong demand for RR/RRS/Defender (74 per cent of order book), which augurs well for FY24 performance as supply has gradually improved. India CV should continue to benefit from good demand and focus on the demandpull strategy, Motilal Oswal Financial Services said in result update.

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/margin drivers, and a sharp improvement in FCF and leverage in both JLR and the India business, the brokerage firm said.