Shares of Tata Motors Ltd plunged as much as 30%, its maximum single day fall since February 1993, as many brokerages have downgraded the stock and cut its target price after the company posted a biggest loss in India’s corporate history due to an impairment charge for its luxury car unit Jaguar Land Rover.
The stock fell 29.45%, its biggest slump since 3 February 1993 on intraday basis and touched a low of ₹141.90 a share. In last one year it has dropped 51%. The stock ended at ₹151.30, down 17.28% or ₹31.60 on the BSE.
Tata Motors reported a consolidated loss of ₹26992.54 crore due to its biggest ever write off of GBP3.10 billion for JLR. The write-off has been attributed to slowing sales in China, technology disruptions linked to a shift towards eco-friendly hybrid and electric vehicles, and also the rising cost of debt. Last time, Indian Oil Corp for June 2012 quarter reported a loss of ₹22450 crore.
Tata Motors consolidated revenue grew 4.4% in the December quarter to ₹77,582.71 crore, from ₹74,337.70 crore a year earlier. JLR’s sales, which has been contracting every month since July, fell 6.4% y-o-y in the December quarter to 144,600 vehicles. Sales in China fell 47% y-o-y last quarter offsetting 21% and 18.4% increase in North America and the UK respectively
JLR faces headwinds such as China slowdown and Brexit uncertainties. Weak demand persists in China, and market share losses could continue for JLR, due to structural issues in the distribution network and rising competitive intensity, analyst expects. Moreover, Brexit can have negative implications, due to tariffs and change in manufacturing/sourcing strategies.
“We remain concerned over near-term volume pressures especially in China (management targets to reduce inventory to 1.5 month) which will lead to further de-stocking in Q4FY19 (which was expected to be complete by Q3). Post that focus would remain on Brexit and uncertainties if at all there is a no-Brexit deal. Management’s margin guidance does not factor in a no-deal Brexit", said Elara Capital in a 8 February note. The brokerage firm has downgraded the stock to accumulate from buy earlier with a target price to ₹195 from ₹236 a share.
Its standalone operations grew three-fold from the year earlier in the December quarter to ₹618 crore. Stand-alone revenue grew 1.85% to ₹16,477 crore.
JLR’s EBITDA margin contracted steeply, by 350 basis points year on year to 7.3% mainly due to lower volumes in China, higher warranty costs, and destocking expenses. In comparison, standalone margin expanded 80 basis points year on year to 8.1%, due to a turnaround in the passenger vehicle division.
Brokerage firm Emkay has downgraded Tata Motors rating to Hold from Buy with a revised target price of ₹192 a share from ₹256 a share. “Despite the cost-reduction efforts, free cash flows are expected to remain negative over FY19-21, due to the large capex requirements of JLR", Emkay Global added in its recent report.
Of the analysts covering the stock, 23 have a “buy" rating, 14 have a “hold" rating, while three have a “sell" rating, shows Bloomberg data.