Tata Motors raised share price after Q3 profit rose 67% YoY; Kotak retains selling - here's why

Tata Motors raised share price after Q3 profit rose 67% YoY; Kotak retains selling - here's why


Tata Motors share price opened higher by over 2 percent on February 1 ahead of Budget 2021 after the company declared its Q3 results.

The auto major reported a 67 percent year-on-year (YoY) growth in consolidated profit at Rs 2,906.45 crore for the quarter ended December 2020 driven by robust volumes, improved product mix and cost-saving measures. Profit in the year-ago period was Rs 1,738.3 crore.

Consolidated revenue from operations grew by 5.5 percent YoY to Rs 75,653.8 crore in Q3 FY21.

"Despite pandemic related uncertainties, supply bottlenecks and commodity inflation, we expect to consolidate our gains and end the fiscal year on a strong note. We remain committed to consistent, competitive, cash accretive growth and deleverage the business through the focused execution of our strategy in all our businesses," Tata Motors said in its BSE filing.

Motilal Oswal has buy call on Tata Motors
NSE 6.43 % with a target price of Rs 350. The current market price of Tata Motors Ltd. is Rs 257.95.

Tata Motors Ltd., incorporated in the year 1945, is a Large Cap company (having a market cap of Rs 81147.34 Crore) operating in Auto sector. 

Financials
For the quarter ended 31-12-2020, the company reported a Consolidated sales of Rs 74878.98 Crore, up 41.71 % from last quarter Sales of Rs 52839.02 Crore and up 5.39 % from last year same quarter Sales of Rs 71051.42 Crore Company reported net profit after tax of Rs 3222.21 Crore in latest quarter.

Investment Rationale
The stock trades at 3.4x FY22 EV/EBITDA and 1.4x P/BV. Maintain Buy, with TP of ~INR350 (Mar’23-based SOTP).

Promoter/FII Holdings
Promoters held 42.4 per cent stake in the company as of Dec 30, 2020, while FIIs held 15.6 per cent, DIIs 12.7 per cent and public and others 29.3 per cent. 

JLR's revenue in Q3FY21 declined 6.5 percent to 5,982 million pound compared to corresponding period, with favourable sales mix, cost performance and partial reversal of prior period reserves for emissions and residual values, said the company.

Retail sales fell 9 percent YoY to 1,28,469 vehicles but the same increased 13.1 percent sequentially. "Sales in China were up 20.2 percent on the prior quarter and up 19.1 percent year-on-year. Most other regions also witnessed a sequential recovery though still below prior year," said the company.

"Free cash flow in the third quarter was 562 million pound, primarily reflecting the strong PBT and favourable working capital after 675 million pound of investment spending," Tata Motors said.

The stock was trading at Rs 264.05, up Rs 1.45, or 0.55 percent at 09:22 hours. It has touched an intraday high of Rs 271.00 and an intraday low of Rs 263.30.

On standalone basis (mostly the domestic business including commercial vehicle), Tata Motors posted a loss of Rs 638.04 crore in Q3FY21, narrowing from loss Rs 1,039.51 crore reported in corresponding period, due to better volumes, improved product mix, lower VME and cost savings offset partially by lower proportion of commercial vehicle in total sales, commodity inflation and financing costs.

Global research firm Credit Suisse has maintained a neutral call on the stock with target at Rs 239 per share. 

The research firm believes that market share and EV concerns along with mix and cost headwinds keeps itself on the sidelines, according to a CNBC-TV18 report.

Domestic brokerage firm Kotak Institutional Equities has retained a sell on the stock with target of Rs 180 per share. The company reported strong operational performance in standalone and JLR business but JLR cost-cutting initiatives may not be sustainable, the firm said.