Brokerages cut price targets on Tata Motors post poor Q3 results

Tata Motors’ shares recorded their second worst ever single-day fall on Friday, in reaction to the company’s biggest ever quarterly loss in the December quarter,sparking target price cuts from brokerages and in some cases rating downgrades.

The stock plummeted 17.3% to close at ₹151.30 on the BSE after falling as much as 22% intraday. With Tata Motors as the worst performer on both benchmarks, Sensex fell 424.61 points or 1.1% to close at 36,546.48 and Nifty declined 125.80 points or 1.1% at 10,943.60.

“Despite a 65% stock price fall over the past two years, we see more downside given insufficient near-term product triggers in JLR, Brexit uncertainty and an imminent downturn in Indian trucks,” said CLSA, retaining ‘sell’ rating with a target price of ₹150.

Phillip Capital cut target price the most, by 31% to ₹200 while Nomura, Kotak Institutional Equities, JM Fiancial, Jefferies, Edelweiss and Citi cut target price by 7-28%. Nomura even downgraded the stock to ‘neutral’ from ‘buy’ and reduced target price to ₹187 from ₹260. Motilal Oswal downgraded the stock to neutral and lowered target price to ₹166.

“...market conditions in China are likely to remain tough, the UK faces risks from “no-deal Brexit” and premium segment volumes are not growing in other markets,” said Nomura.

Although Tata Motors has seen target price cuts post third quarter results and some downgrades, there are many brokerages who still have a buy recommendation on it. Phillip Capital said it has maintained buy rating as it sees steps by the company bearing fruit and also because of favourable valuations.

Kotak Institutional believes that the management is on course to improve operating margins in both standalone and JLR business led by cost reduction initiatives.