With its British subsidiary, Jaguar Land Rover (JLR), facing headwinds due to semiconductor shortage and Covid lockdowns in China, Tata Motors’ consolidated net loss widened to Rs 5,006.60 crore during the quarter ended June 30. Brokerage firm ICICI Securities believes most of the headwinds for JLR will soon ease, driving reversal in margin back towards 12% levels.
“Though we were expecting a weak set of numbers from Tata Motors, primarily due to headwinds faced by JLR, the overall performance reported was even weaker than we anticipated, which we believe is non-recurring. JLR’s Ebitda margin came in at 6.7%, down almost 500bps q-o-q, owing to a combination of poor model mix, poor market mix, adverse commodity costs, low scale and forex losses,” ICICI Securities said in a report.
It further said that with Range Rover and Range Rover Sport production picking up to 1,300 units a week as against 6,000 units wholesale in Q1, the mix is set to improve from Q2 itself other than production rising towards 90,000 units. “Thus we believe most of the headwinds for JLR will soon ease, driving reversal in margin back towards 12% levels,” it added. The brokerage firm maintains a ‘buy’ on the stock.
The demand for JLR vehicles remained strong with a record 200,000 client orders in Q1. Among the models, Range Rover, Range Rover Sport and Defender accounted for more than 60% of client orders. The company expects the semiconductor supply to get better gradually apart from a significant improvement in volumes and profitability over the remaining FY23.
On the domestic front, Tata Motors’ passenger vehicle (PV) wholesales jumped 102% y-o-y to 130,125 units in Q1 FY23, while the commercial vehicle (CV) wholesales increased 121% y-o-y to 95,703 units. The electric vehicle (EV) volumes rose 441% to 9,283 units during the quarter.
“Tata Motors’ Q1 FY23 performance saw a sharp miss due to several headwinds at JLR (mix, cost inflation, and hedge revaluation), though the India business delivered a strong performance,” said Motilal Oswal.
Given the improvement in semiconductor supplies and strong order book at JLR, there is hope of JLR making good on the pain of the June quarter, the brokerage firm said, adding that the India business should benefit from a continued demand recovery in CVs and production ramp-up in PVs.
While the earnings were announced after trading hours on Wednesday, Tata Motors’ stock opened 1.16% down on the BSE on Thursday at Rs 438.80 apiece. It touched a high of Rs 449.10 and a low of Rs 427.35 intraday. The stock ended the day at Rs 442.35, down 0.36% from the previous close.
