Tata Motors falls 5% as Q4 results disappoint; here's what top brokerages recommend

NEW DELHI: Tata Motors closed the day at Rs 471.65; down 5.12%. The stock fell as much as 6.67 per cent in intraday trade after the company reported a 56.19 per cent decline year-on-year decline in consolidated net profit at Rs 1,716.50 crore for the fourth quarter ended March 31, which came below Street as well as ET Now estimates.

The fall in net profit was largely on account of domestic business which remains a drag, while British arm Jaguar Land Rover also witnessed weak demand. Tata Motors also suffered losses on account of cross-currency headwinds.

"We had to incur a translation loss of 90 million on account of 2.5-billion foreign currency loans and 150 million on forward hedges," says Vijay Somaiya, VP and head, treasury and investor relations at Tata Motors.

Reacting to the results, most brokerage firms have slashed their 12-month target price for Tata Motors, but maintained their rating on the stock.

Morgan Stanley which maintains an overweight rating said that the miss at the PAT level was driven largely by non-cash charges. Going forward, margins are likely to remain weak on China ramp up, and soft demand.

JLR, which makes up for over 95% of Tata Motors profits, posted a very modest 3.9% volume growth in Q4. Jaguar Land Rover (JLR) profit after tax during the fourth quarter stood at 302 million pounds as against 449 million pounds in the corresponding period last year.

Credit Suisse which maintains outperform rating on the stock says that JLR's EBITDA margins disappointed this quarter. They have also revised down their estimates by 5 per cent on JLR margins.

According to reports, JLR posted a very modest 3.9 per cent volume growth in Q4. The automaker's arm was dragged by a 20 per cent decline in China sales which contributes about a fifth of its overall sales.

The magnitude of fall in China sales can be attributed to the fact that about a quarter back, China sales made up for about 27.9%, said media reports.

Consolidated net sales during the period under review stood at Rs 67,297.99 crore as against Rs 64,715.81 crore in the year-ago period, up 3.99 per cent, the company said in a filing to the BSE.