Should you invest in Tata Motors after over Rs 7,500 crore loss in Q4?

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Analysts hold a mixed view on Tata Motors after it reported a surprised loss in the March quarter on Tuesday. The home-grown auto major posted a narrowing of consolidated net loss at Rs 7,585 crore for the fourth quarter ended March 31, 2021, aided by improved sales. It had posted a consolidated net loss of Rs 9,864 crore in the January-March period of 2019-20.

Shares of the company traded 4.44% down at Rs 317.60 at around 10 am (IST). On the other hand, the benchmark BSE Sensex was up 28 points, or 0.06%, at 50,221 at around the same time.

The company’s British arm, Jaguar Land Rover reported a pre-tax loss of 952 million pounds for the quarter owing to the 1.5 billion pounds of exceptional charges, including 952 million pounds of non-cash write-downs of prior investments and 534 million pounds of restructuring charges expected to be paid in FY’22.

This was on account of JLR’s new global strategy to ‘Reimagine’ the future of modern luxury by design and deliver double-digit EBIT margins by fiscal 2025/26.

Should you invest?

Emkay Global Financial Services retained ‘Buy’ on Tata Motors with a price target of Rs 410, indicating an upside of 29% from the current market price. “We reaffirm our high-conviction Buy on expectations of a strong cyclical upturn in the standalone business and in JLR, margin expansion emanating from cost-cutting measures and debt reduction on robust free cash flow generation and divestments,” it said.

On the other hand, Prabhudas Lilladher maintained a ‘Reduce’ rating on the auto major with a target price of Rs 279 (Rs 271 earlier). The brokerage added that the key upside risk is the global car alliance boosting scale as JLR volumes remain muted at -13% CAGR over FY18-21.

Sharekhan has revised the target price upward to Rs 430, factoring in an improvement in operational performance across businesses, a positive outlook for JLR and domestic businesses, and robust free cash flow generation, leading to a significant fall in debt.

“Tata Motors beats expectation in Q4FY21, driven by strong all-round operational performance, with overall adjusted PAT growing 72.5% QoQ, driven by 17% revenue growth and 11% EBITDA growth,” Sharekhan said.