BackTata Motors dives 20% to hit near seven-year low on JLR woes
Tata Motors shares touched a low of ₹170.65 a share, a level last seen on 30 December 2011, and fell as much as 19.8% in intraday trading.
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Mumbai: Shares of Tata Motors Ltd on Tuesday slumped nearly 20% to hit a near seven-year low after Jaguar Land Rover reported a 12.3% decline in global sales. Investor sentiment was also dampened after the company announced a shutdown of its West Midland plant for two weeks due weak global demand.
The stock touched a low of ₹ 170.65 a share, a level last seen on 30 December 2011, and fell as much as 19.8% in intraday trading. Tata Motors shares closed at ₹ 184.25 per share on BSE, down 13.40% from its previous close. So far this year, Tata Motors has dropped over 60%.
JLR reported retail sales at 57,114 cars in September, down 12.3% from a year ago. Its sales were down a modest 0.8% in the UK and 4.7% in Europe. In North America, sales were 6.9% lower.
The company said it would stop production at the Solihull plant in the UK for two weeks. The plant has 9,000 staff after cutting 1,000 temporary workers this year.
“As a business we are continuing to experience challenging conditions in some of our key markets. Customer demand in China, in particular, has struggled to recover following changes in import tariffs in July and intensifying competition on price, while ongoing global negotiations on potential trade agreements have dampened purchase considerations. Despite this, we expect lower tariffs on UK imports to be beneficial over the full year," said Felix Brautigam, chief commercial officer, Jaguar Land Rover, in a notice to the BSE.
CRISIL and Fitch Ratings recently revised its rating outlook on the company due to weaker performance of JLR in terms of sales volumes, operating profitability and cash flow generation.
JLR’s free cash flow fell significantly during 2017-18 to negative £1 billion (about 4.2% of sales), with Fitch expecting this metric to fall further to about -6% by the end of the current financial year.
The company has not yet announced its earnings date for the September quarter. However, according four Bloomberg analyst estimates, Tata Motors may report a consolidated loss of ₹ 39.10 crore while revenues will be ₹ 69,643.70 crore. On a standalone basis, it may report a profit of ₹ 20.10 crore while sales will be ₹ 30,754.10 crore.
“The company is likely to report 445 bps YoY margin contraction owing to lower scale in JLR and commodity inflation. JLR’s EBITDA margin would contract 374 bps YoY (+184 bps QoQ) to 8.2% led by negative operating leverage," said HDFC Securities in a 8 October report.
Of the analysts covering the stock, 29 have a “buy" rating, nine have a “hold" rating, while three have a “sell" rating, shows Bloomberg data.
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