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Business News/ Market / Stock-market-news/  Tata Motors shares hit 27-month low on JLR headwinds
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Tata Motors shares hit 27-month low on JLR headwinds

Tata Motors has been the worst performing stock in the 50-share index Nifty, losing 34% in this year

Dragged by Jaguar Land Rover’s (JLR) weak performance Tata Motors reported consolidated net profit fell to Rs2,175.16 crore for the fourth quarter from Rs4,336.43 crore in the year-ago period. Photo: BloombergPremium
Dragged by Jaguar Land Rover’s (JLR) weak performance Tata Motors reported consolidated net profit fell to Rs2,175.16 crore for the fourth quarter from Rs4,336.43 crore in the year-ago period. Photo: Bloomberg

Mumbai: Tata Motors shares plunged about 8% on Thursday hitting a 27-month low with brokerages slashing the target price on the back of a 50% fall in the company’s profit for the March quarter.

The stock closed at Rs288.95, a level last seen on 11 February 2016. Tata Motors has been the worst performing stock in the 50-share index Nifty, losing 34% in this year.

Dragged by Jaguar Land Rover’s (JLR) weak performance Tata Motors reported consolidated net profit fell to Rs2,175.16 crore for the fourth quarter from Rs4,336.43 crore in the year-ago period. The auto major’s performance in the quarter was impacted on account of exceptional and additional charges of Rs2,113 crore for projects, which are yet to be taken forward.

Analysts said that the near-term demand outlook for JLR remains challenging due to weakness in key markets, including the UK, Europe and the US. Most analysts have trimmed their target prices on the stock citing headwinds for the British subsidiary.

Revising its target price to Rs398 per share from Rs477, Kotak Securities Ltd said that JLR’s Ebitda margin is expected to face headwinds from change in product development cost capitalisation policy, higher incentives and weak demand in certain markets. The brokerage firm has a buy rating on the stock.

Edelweiss Securities Ltd has also cut the target price to Rs351 from Rs442 a piece. Though it has a hold rating, Edelweiss Securities has revised down the FY19-20 Ebitda by 12%, each, and earnings per share (EPS) by 31% and 21%, respectively, due to the changes in the company’s accounting policy for capitalisation of research and development spends.

“We are enthused by intensified restructuring initiatives to improve cash flow, efficiency, and non-core assets sale, and JLR’s strong product pipeline; and volume and margin revival in India. However, sustained demand headwinds in the UK, the EU and the US for JLR, and the higher capex of GBP 4.5 billion in FY19, are anticipated to lead to another year of negative FCF (free cash flow)," it said in a report on 23 May. It maintains hold rating on the stock.

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Published: 24 May 2018, 11:10 AM IST
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