Rakesh Jhunjhunwala-owned Tata Motors shares fall on weak Q3FY22 biz update; should you buy, sell or hold?

Rakesh Jhunjhunwala-owned Tata Motors’ share price was down 2.3% on Thursday trading at Rs 495 per share as investors reacted to the company’s third-quarter business update for the Jaguar Land Rover unit.

tata motors
The continued shortage of semiconductors is expected to have a negative impact on Tata Motors' volumes. (Image: REUTERS)

Rakesh Jhunjhunwala-owned Tata Motors’ share price was down 2.3% on Thursday trading at Rs 495 per share as investors reacted to the company’s third-quarter business update for the Jaguar Land Rover unit. Tata Motors informed the stock exchanges that during the third quarter of the fiscal year, sales were better than the previous quarter but continued to be constrained by the shortage of semiconductors. Analysts, however, remain optimistic about Tata Motor’s domestic and foreign business prospects. Big Bull Rakesh Jhunjhunwala owned 3.76 crore equity shares of the auto giant at the end of the September quarter.

Semiconductor shortage weighs on Jaguar Land Rover 

Jaguar Land Rover said that retail sales for the October-December quarter continued to be constrained by the global semiconductor shortage. They added that there was, however, some improvement in chip supply and wholesale volumes compared to the preceding quarter. Retail sales were down 13.6% on-quarter basis and 37.6% on-year basis. However, wholesale volumes were at 69,182 units and production volumes were 72,184 units, up 8% and 41% respectively compared to the preceding quarter.

The continued shortage of semiconductors is expected to have a negative impact on Tata Motors. “Including China, JV wholesales are now expected at below 90,000 units in the third quarter against our initial estimates of 1.05 lakh units,” said ICICI Direct. “The sequential improvement is rather slow and is below our estimates. This is likely to result in muted profitability for the third quarter amidst lower than anticipated operating leverage gains,” they added.

Bullish view

Analysts at Motilal Oswal said that Tata Motors’ all three businesses are in recovery mode. “While the India CV business would see cyclical recovery, the domestic PV business is in a structural recovery mode. JLR is also witnessing a cyclical recovery underpinned by favorable product mix; however, supply-side headwinds will defer the recovery process,” they said. The brokerage firm believes the domestic business of Tata Motors would continue to see sustained revival. “The stock trades at 20.1x FY24E consol. EPS and 3.1x P/B. Maintain BUY with a Mar’24 SOTP-based TP of Rs 610…” the brokerage firm said, implying a 23% upside from today’s low.

Yes Securities is also bullish on Tata Motors for 2022, pinning a target price of Rs 566 per share. “We like Tata Motors, given its improving India franchise, early leadership in EVs in India, and JLR focus returning to the higher-margin Land Rover brand. Further, the recent TPG deal provides additional headroom on India EV capabilities,” the brokerage firm said earlier.

Rakesh Jhunjhunwala’s second-largest bet

Tata Motors is Rakesh Jhunjhunwala’s second-largest shareholding in terms of value. The ace investor picked up a stake in Tata Motors in the second half of 2020 and currently owns just over 1.11% stake in the company valued at Rs 1,830 crore.

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