See near-term downside on Tata Motors: Kotak

Market analysts sense a downside for Tata Motors in the near-term given the company’s performance. Hitesh Goel, analyst at Kotak Institutional Equities is also concerned about its volume growth in the near-term. “They have a capacity constraint of 110,000-112,000 per quarter”, he tells CNBC-TV18.

However, in the long-term, Goel is positive on the stock as volumes are set to rise with the induction of the new models of JLR. They will surprise the street later, he adds.  Below is the edited transcript of his interview to CNBC-TV18. Q: The opinion has flipped down in the middle. Some indicate that this is a good time to sell the stock given the outperformance but others also believe that there is lot to go once the new product for JLR come out. How are you positioned on the stock post numbers? A: Near-term, there will be slight selling on the stock largely because this quarter numbers were not very good. They had this one of incentive of 79 million pounds. If you remove that actually the margins are around 16 percent, which was slower than what street was expecting at 17 percent. Currency has moved against the company and you will see the effect in the next quarter. So, near-term it is a slight bit of concern. On the volume front too, they are capacity constraint; they cannot do more than 110,000-112,000 kind of numbers in a quarter. So, volume growth will surprise on the positive. Stock could trend down slightly but we believe that longer-term still we think from a two-three year perspective, the volume growth could surprise us straight because of the new model which is coming. Q: How much would you lower the next two quarter estimates at all after looking at the dismal domestic performance as well like you pointed out some question marks on the margin even in the global units? A: It depends on the currency. If the currency remains at these levels, there will be slight downward revision in JLR but on the standalone they are anyway taking more than Rs 2,000 crore of loss in the full. A slight downside on the JLR may happen if currency rates remains in the range but it is a currency call.