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Tata Motors, DVR shares jump 15% post Q2 earnings; brokerages upgrade rating, target

Nomura has upgraded Tata Motors’ rating to neutral from reduce and increased the target price to Rs 153 from Rs 109 per share

October 29, 2019 / 09:57 AM IST
 
 
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Shares of Tata Motors and Tata Motors - DVR gained 15 percent each in early trade on October 29 after company's net loss declined in the quarter-ended September on the back of improved performance of its UK subsidiary.

The company reported a 79 percent year-on-year (YoY) fall in its Q2 FY20 net loss at Rs 216.6 crore.

The company's British luxury arm Jaguar-Land Rover posted a pre-tax loss of 395 million pounds. Land Rover's performance improved during Q2 as revenue of this segment improved eight percent to six billion pounds.

Jaguar's EBITDA margin stood at 13.8 percent, which is among the highest in the last 16 quarters, the management claimed. EBIT margin came at 4.8 percent.

The group's consolidated revenue came in at Rs 65,432 crore, lower than Rs 71,981.08 crore in the same quarter last year, but higher than CNBC-TV18 poll estimate of Rs 63,434 crore.

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The board has approved issue and allotment of up to 20,16,23,407 ordinary shares at Rs 150 per share and 23,13,33,871 convertible warrants, which can be converted to one ordinary share, at Rs 150 per warrant to Tata Sons Pvt, the promoter of the company on a preferential basis.

Kotak Institutional Equities | Rating: Buy | Target: Raised to Rs 200 from Rs 190 per share

Consolidated adjusted EBITDA of Rs 7,160 crore is led by sharp improvement in JLR operating performance, said Kotak Institutional Equities. "The company's standalone performance was weak on the back of a steep volume decline in the commercial vehicle business, while JLR may continue its momentum. We expect some recovery in its standalone operation in H2," it said.

Nomura | Rating: Upgrade to neutral from reduce | Target: Increased to Rs 153 from Rs 109 per share

According to Nomura, the healthy cost reduction at JLR and fund infusion are the key positives. It raised JLR's EBITDA margin estimates to 12.6/14/15 percent from 10/12.3/12.8 percent for FY20/21/22 , respectively, and expects JLR to breakeven at the free cash flow level by FY22.

CLSA | Rating: Upgrade to buy from sell | Target: Raised to Rs 190 from Rs 120 per share

The JLR business is bottoming out and margin has started to recover after four consecutive years of contraction, CLSA said. It expects the Indian business to remain weak in FY20-21 and hence its cut FY20 EPS estimate. However, it has raised its FY21 and FY22 earnings by 4 percent and 16 percent, respectively.

BofAML | Rating: Upgrade to buy from neutral | Target: Raised to Rs 190 from Rs 170 per share

The JLR's uptick is on the back of improved volumes and cost savings, while China improvement and new launches are the tailwinds for H2, BofAML said. It raised its JLR EBITDA estimates by 8/10 percent for FY20/21, respectively. It values the auto maker's India business at nine times FY21 EV/EBITDA, implying an enterprise value of Rs 34,000 crore (Rs 100 per share).

At 09:36 hours, Tata Motors was quoting at Rs 168.90, up Rs 20.95, or 14.16 percent. The Tata Motors - DVR was quoting at Rs 76.95, up Rs 10, or 14.94 percent, on the BSE.



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first published: Oct 29, 2019 09:57 am
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