Axis Securities has recommended a BUY on Tata Motors with a Target Price of Rs. 150, and an upside of 10% from CMP of Rs. 136 and Stop Loss of Rs. 131.
Tata Motors Ltd (TML) reported a consolidated net loss of Rs 307.3 crs in Q2FY21, up significantly from a loss of Rs ~8,444 crs in Q1FY21 but lower than the pre-covid net loss of Rs ~188 crs in Q2FY20. This quarter witnessed strong sequential recovery and significantly positive free cash flows following the restart of production and the reopening of the company’s domestic as well as global retail network.
JLR Business: JLR generated a £65 million PBT in Q2FY21 up significantly from a loss of £413 million in Q1FY21 but lower than the pre-covid PBT of £156 million a year ago. Margins improved from Q1 with EBITDA at 11.1% and EBIT at 0.3%. Going forward, a gradual improvement in sales is expected to continue and will be supported by new and refreshed range of products. Furthermore, JLR also continues to expand its offering of electrification across its model range.
TML (Standalone) Business: In India, the PV segment continued its strong growth momentum in the quarter whereas CV witnessed gradual recovery across segments. PV achieved EBITDA breakeven led by strong customer pull for its ‘NEW FOREVER’ range. CV profitability improved sequentially but continues to be impacted by lower volumes and adverse mix on a YoY basis. Business generated strong positive FCFs led by the cash savings initiatives which yielded ₹1.5K Crs in the quarter and ₹2.5K Crs year to date.
Despite concerns around risk of second wave of infection in many countries and other geopolitical risks, we expect a gradual recovery of demand and supply in the coming months. Also, Company is committed to achieving near zero net automotive debt in the coming years by focusing on better front-end activations of their product range and accelerating its cost saving programs both in India as well as overseas.