Tata Motors up 4%; India business recovery to accelerate, but JLR outlook key

TATAMOTORS

MUMBAI: Shares of auto major Tata Motors Ltd rose 3.75% on the National Stock Exchange on Tuesday as the Street cheered the management’s comments shared on India Business Investors Day.

The management reiterated its key focus areas for the next two to three years, which include securing market share gains in passenger vehicles (PV) and commercial vehicles (CV) segments via new launches, double digit Ebitda in commercial vehicles, and high single digit Ebitda. Ebitda is short for earnings before interest, tax, depreciation and amortisation. The management also said that it remains committed to achieving a zero net debt status at the consolidated level by fiscal 2024.

According to analysts, the company’s efforts for a turnaround and accelerating growth in its PV and CV segments, bode well for standalone business. “We believe sharp focus on execution both in CV and PV business will help to drive strong operating performance in standalone business. Hence we build in strong margin recovery in standalone to ~9.2% by FY23E from ~3% in FY21E,” domestic brokerage house Prabhudas Lilladher said in a report on 23 February.

However, the improvement in its consolidated business depends a lot on JLR’s operations. Investors will reckon that JLR volumes have been under pressure since fiscal 2019, hit by several headwinds. Analysts are not too confident of a quick revival here and await a detailed plan by the management on scaling up volumes. Tata Motors will be hosting JLR Investors Day on Friday.

Another pain point for the company and the entire automobile sector is input cost inflation. The company’s management expects gross margin to remain under pressure in the near term due to increasing commodity prices. However, to offset the impact, Tata Motors is working on cost savings and price increases, the management said.

It should be noted that Tata Motors has taken price hikes in the second of FY21 and the management has hinted towards further increases.

“The company was cautious on rising commodity cost pressures in 1HFY22 but believed that through right product interventions, price hikes and cost-reduction efforts, they can mitigate part of the commodity cost inflation. We maintain our sell rating on the stock as we remain skeptical of recovery in volumes in the JLR business,” analysts at Kotak Institutional Equities said in a report on 23 February.

News Source:- livemint

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