Tata Motors shares surge despite wider Q2 loss. Should you buy

02 Nov , 2021 By : Kanchan Joshi

Shares of Tata Motors today surged 5% to Rs505.15 in early trade on BSE despite reporting a higher second quarter loss. Homegrown auto major Tata Motors Ltd (TML) on Monday reported a widening of consolidated net loss to Rs4,441 crore for the second quarter ended September 30, due to higher expenses and lower sales of its British arm JLR following semiconductor shortage.

The company had posted a consolidated net loss of Rs314 crore in the same period last fiscal. Jaguar Land Rover (JLR) had a revenue of 3.9 billion pounds with a pre-tax loss of 302 million pounds in the second quarter.

“JLR believes the worst of the chip shortages are behind and volumes should gradually improve in 2H. It is seeing good demand, has strong order book, and next-gen RR/RR-Sport launches should boost volumes. India business should continue to improve sequentially driven by demand recovery, market share gains and better margins," said Jefferies in a note. It has reiterated Buy tag with target price of Rs625.

JLR wholesales in the second quarter were 64,032 units, down 12.8% from the year-ago quarter, and retail sales, including the China joint venture, stood at 92,710 units, down 18.4%, reflecting the semiconductor shortage and lower retailer inventories, the company said.

“JLR’s order book is strong at 125,000 units, while dealer inventories are at historically low levels. New generation products like RR/RR sport are likely to be launched in coming quarters. Chip supplies should improve ahead but at a slower rate than expected," said Emkay. The brokerage has a Buy rating on the stock with a target price of Rs550 per share.

Though, Emkay sees delay in ramp-up of production due to supply issues for semiconductors, luxury car demand contraction in target markets, slower macro recovery in India, failure of new launches, and adverse currency/commodity prices as key risks.

Another brokerage ICICI Securities likes Tata Motors continued market share gains in the domestic PV business, CV upcycle and delivery on FCF generation coupled with structured aggression in EVs. It has also maintained its Buy tag on the auto stock with a revised target price of Rs661 (from Rs646 earlier).