Tata Motors Limited is an Indian multinational automotive manufacturing company, headquartered in Mumbai, India, which is part of the Tata Group. The company produces passenger cars, sports utility vehicles, trucks, vans, coaches, buses and defence vehicles to the world.
Tata Motors has operations in India, the UK, South Korea, South Africa, China, Brazil, Austria and Slovakia through a strong global network of subsidiaries, associate companies and Joint Ventures (JVs), including Jaguar Land Rover in the UK and Tata Daewoo in South Korea.
Quarterly Growth Walkthrough
Tata Motors posted its first quarterly profit in two years supported by a heightened demand for passenger cars and medium and heavy commercial vehicles. The company reported a consolidated net profit of Rs 3,043 crore for the third quarter ending December as compared to a net loss of Rs 1,451 crore in the corresponding quarter of the previous year.
Revenue from operations was reported at Rs 88,489 crore which is up by a spectacular 22.5 percent from Rs 72,229 crore in the corresponding quarter of the last year.
Tata Motors consolidated operating profit which is also known as EBITDA has risen by 11% YoY to Rs 9,900 crore and the margins have improved by 90 basis points to 11.1%.
The company said in an exchange filing, “We remain cautiously optimistic on the demand situation despite global uncertainties. We will remain vigilant on demand and our continued focus on profitable growth, improving semiconductor supplies and stable commodity prices will aid revenue growth, margin improvement and positive cash delivery in Q4 FY23”.
Segment wise performance
Tata Motors reported a 6.4 per cent growth in total vehicle sales at 81,069 units in January. Compared with the corresponding period last year, the company’s total vehicle sales were at 76,210 units.
Passenger Vehicles (PV)
Tata PV revenues were up by 37 percent YoY at Rs 11,700 crore which depict higher volumes and realizations. EBITDA margins were at 6.9 percent (+370 bps YoY) which were supported by improved volumes and strong product range, higher realizations, softening commodity prices and particular discounts.
PV domestic wholesales were reported at 1,31,300 units (+33 percent), domestic retails at 1,38,900 units (+27 percent) which has been the highest till date. The electric vehicle (EV) volumes were also highest at 12,600 units (+116 percent).
Commercial Vehicles (CV)
Tata CV revenues were up by 22.5 percent at Rs 16,900 crore. The EBITDA margins were 8.4 percent (+580 bps YoY) which were supported by similar reasons as noted for the PVs above.
Tata CV global wholesales were reported at 97,100 units (-6 percent YoY) during the quarter, mainly due to diminishing international business volumes. CV domestic wholesales were at 90,800 units (flat YoY), domestic retails at 97,700 units (+5 percent).
Jaguar Land Rover (JLR)
The revenue for Jaguar Land Rover (JLR) which is the biggest unit of Tata Motors was at £6 billion, up by 28 percent YoY and up 15 percent sequentially.
Profit before tax was reported at £265 million which is an improvement from a loss of £9 million a year ago with a positive EBIT margin of 3.7 percent (+1.4 percent) in the December quarter.
The higher profitability was supported by rising wholesale volumes with favourable product range, pricing and foreign exchange which was slightly negated by higher inflation and supplier claims largely related to constrained volumes.
Wholesale volumes were at reported at 80,000 (+15 percent YoY) which has been the highest since the first quarter of the previous fiscal year when the company faced shortages in semiconductors. The segment had high liquidity by the end of the quarter with £3.9 billion of cash.
Technical Analysis
Tata Motors share price faces tough resistance at Rs 450 which shows a strong operators’ presence at this level. The stock price is trying to make a break over this level but has failed in the past 6 trading sessions. Tata Motors stock has frequently made gaps which are eventually filled over time. The recent two gaps in the up-move are marked by the yellow boxes which give us an indication of the price returning to those levels for gap filling.
Considering the strong quarter and the company back in the green by reporting a profit in the last quarter, the stock may rally up to its distribution zone in the range of Rs 530 – Rs 500 in the mid-term. The daily MFI is at 90 points which indicates that the stock is highly overbought, and the price is above the 200-day moving average which shows us that the price is very expensive.
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