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Tata Motors stock recovered after earlier falling as much as 2.5 per cent.
The Q1 profit has nearly halved as the company has cut sales, and production targets for Jaguar Land Rover in China.
Analysts have trimmed the estimates but have kept “buy’’ rating saying China related weakness looks largely discounted and valuations remain supportive.
According to them, the valuation is nearly 3x of FY17 EV/EBITDA for unit JLRand 10x for FY17 earnings for India business.
Operating leverage, rather than pricing, was the reason for weak profitability, implying margins could potentially improve as production of the new models ramp up, says Jefferies.
Given the sharp fall in the stock in the past few months, it is factoring in China negatives but ignoring positive response to recent launches and strong product cycle, says Credit Suisse.
The stock has 40 buy, 3 hold, and 2 sell ratings, according to Eikon data.
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