Tata Motors shares’ 42% crash from peak wipes off ₹1.8 lakh crore from investor wealth

Shares of Tata Motors, a number one international car producer, have been sustaining a gradual downward spiral in latest weeks, tumbling to ranges not seen in lots of months. The inventory, which constantly broke document highs between March 2023 and July 2024, is now changing into much less interesting to traders, having declined for six consecutive months. 

The promoting strain has prolonged into the present month, with the inventory hitting a 14-month low of ₹667 apiece in commerce on Wednesday, February 12, declining 4.45% to date.  Since reaching an all-time excessive of ₹1,176 apiece in July 2024, the inventory has corrected by 42%.

This important drop has led to large losses for retail traders, who held a 21.9% stake within the firm on the finish of the December quarter. The correction has additionally worn out ₹1.8 lakh crore in market capitalization, bringing it down from ₹4.32 lakh crore to the present degree of ₹2.52 lakh crore.

The corporate’s latest December quarter outcomes additionally got here in beneath estimates, triggering additional sell-off within the inventory. Weak Jaguar and Land Rover (JLR) efficiency, a decline in business automobile (CV) gross sales, financial challenges in European markets, and weak demand in China have all impacted the corporate’s efficiency in Q3FY25.

The corporate’s web revenue declined by 22.5% in Q3 FY25 to ₹5,578 crore from ₹7,415 crore, whereas income grew marginally by 2.7% to ₹1,13,575 crore. In Q3 FY25, JLR’s EBIT margins improved YoY to 9%, however analysts be aware that a lot of this enchancment was pushed by a discount in depreciation.

Given the challenges in key markets, the corporate has marginally lowered FY25E JLR income steering to £29 billion from £30 billion earlier and maintained steering on EBIT margin at 8.5%.

Moreover, margins in India’s CV and passenger automobile (PV) companies had been boosted by PLI accruals, which aided margins by 130 foundation factors and 120 foundation factors for these segments, respectively.

Home brokerage agency Motilal Oswal expects margin strain to persist at JLR over FY24-27E because of weak demand in key areas, rising value pressures from investments in demand technology, and an EV ramp-up, which is prone to be margin-dilutive. Even in India, each the CV and PV companies are witnessing a moderation in demand, it famous.

Motilal Oswal trimmed its EBITDA estimates by 3% and 5% for FY25 and FY26, respectively, factoring in JLR’s weak point, whereas sustaining a ‘Impartial’ score on the inventory with a goal worth of ₹775 apiece. In the meantime, Jefferies India, after sustaining a ‘purchase’ score for 3.5 years, downgraded Tata Motors to ‘Underperform’ and slashed its goal worth to ₹660 apiece after the corporate’s Q3FY25 numbers missed their estimates.

Analysts anticipate restoration in luxurious automobile market

World luxurious automobile volumes declined 3% YoY in 9MCY24, pushed by a 14% YoY decline in China and a 1% YoY decline in Europe, primarily because of recessionary pressures in Germany and France. Nevertheless, this was partially offset by a 1% YoY enhance in North America.

Whereas most luxurious OEMs revised their quantity steering downward, primarily because of weak point within the Chinese language luxurious market, home brokerage agency LKP Securities expects a lagged restoration for luxurious items, together with passenger vehicles in China, over H1 CY25E, supported by interventions from the Chinese language authorities and central financial institution.

Equally, the brokerage anticipates a revival in luxurious gross sales in Europe, pushed by price cuts by the European Central Financial institution (ECB). It additionally expects robust demand for luxurious vehicles to persist in North America, which remained resilient in 9MCY24, regardless of weak point in different developed markets.

Disclaimer: The views and suggestions given on this article are these of particular person analysts. These don’t signify the views of Mint. We advise traders to verify with licensed specialists earlier than taking any funding choices.