Home >Markets >Stock Markets >Should you buy Tata Motors shares after the sharp fall? Here is what brokerages say

Tata Motors shares continued to be under pressure on Wednesday after falling as much as 10% in Tuesday's afternoon deals on JLR's profit warning update led by chip shortage issue that could continue to hurt margin in the second quarter.

The British carmaker Jaguar Land Rover (JLR) issued a profit warning on Tuesday citing the impact of semiconductor chip shortage on vehicle production, sending its parent Tata Motors's stock down. Tata Motors also said that based on the recent inputs from suppliers, the chip supply shortages in Q2 are expected to be greater than that in Q1FY22, potentially resulting in around 50% lower wholesale volumes than planned.

The auto major's scrip fell over 2% in Wednesday's early deals to 310 per share on the BSE.

In a note on Tata Motors, ICICI Securities said that the supply chain issue is a near-term headwind and it believes that the chip shortages related disruptions is a transient global supply chain issue which takes lesser precedence over the demand side (which is strong).

''Chip shortages remain a dynamic situation and difficult to forecast in the short term due to the unique nature of the semi-conductor supply chain. Most global OEM’s (e.g. Ford, GM, Daimler) have witnessed similar chip shortages which has disrupted CY21 production schedules as capacity remains tight. We do not believe this to be lost sales as peers also don’t have significant surplus capacity to benefit,'' ICICI Securities note said. The brokerage has maintained its 'Buy' rating on the stock with a target price of 528.

Domestic brokerage Motilal Oswal has also maintained its buy rating on the auto stock. It said that all three businesses are in recovery mode and while the India CV business would see a cyclical recovery, the India PV business is in a structural recovery mode. JLR is also witnessing a cyclical recovery, supported by a favorable product mix, the brokerage noted.

''While there would be no near-term catalysts from the JLR business, the India business would see a continued recovery. We maintain our Buy rating with a target price of 400 per share,'' Motilal Oswal note said.

Tata Motors shares recovered a bit from lows on Wednesday but still in red at around 11:45 am after the company said that it will hold investor call at 5:30 pm today on Q1 updates.

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