Brokerages cautious on Tata Motors shares over Jaguar Land Rover margin concerns

Nov 12 2013, 09:45 IST
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The Japanese brokerage downgraded stock to 'neutral' from buy with target price of Rs 491. (AP) The Japanese brokerage downgraded stock to 'neutral' from buy with target price of Rs 491. (AP)
SummaryDuring quarter, the company received local tax incentives of £79 mn from UK govt.

The Tata Motors share fell more than 2% on Monday as brokerages downgraded the stock on concerns over Jaguar Land Rover's margins and the company's disappointing performance in the domestic market.

According to brokerages, the strong margins reported by Jaguar Land Rover were due to the tax incentives offered in foreign markets. “During the quarter, the company received local tax incentives of £79 million (1.7% of revenues) from governments of the UK and other countries, which is an annual phenomena and will not be recurring on a quarterly basis. As per the company, local incentives could be lower next year,” said Nomura in a research note.

The Japanese brokerage downgraded the stock to neutral from buy with target price of Rs 491.

CLSA also downgraded the stock to outperform from buy with a target price of Rs 419. The brokerage said the scrip would remain range-bound for 6-9 months. CLSA analysts Abhijeet Naik and Nitij Mangal observed that JLR's Ebitda, excluding incentives, didn’t see a q-o-q improvement.

Although the country’s largest automobile manufacturer by revenue saw its consolidated net profit rise 71% y-o-y to R3,542 crore, domestic operations posted net loss of R804 crore. Domestic net sales were also down 29% to R8,761 crore, marking a sixth straight quarter of decline. Among Indian brokerages, Anand Rathi cut its rating from buy to hold with target price of R402.

On Monday, the Tata Motor share closed at R377 or 2.04% lower. Since Friday, the stock has slipped marginally by 0.7%.

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