The stock of Tata Motors plunged 5 per cent to close at ₹559.60 on Friday after the company posted the steepest decline in profit in seven quarters. Decline in Jaguar Land Rover sales and unfavourable revaluation of foreign currency debt impacted the company’s October-December quarter numbers.
Despite the steep fall in profit, analysts still remain bullish on the stock. The company also said that it is cautiously optimistic about cash flow at JLR next year due to a massive capital expenditure of up to £3.8 billion involving its China venture and other expansion in Britain, where the company is setting up a new engine facility.
Stellar show likelyCredit Suisse in a note said the third quarter consolidated profits at ₹3,600 crore was significantly lower than its estimate of ₹4,900 crore as domestic business losses continue to increase and JLR margins too were a tad lower than expected.
“However, looking ahead, we believe JLR has multiple catalysts. JLR’s volume growth is set to accelerate again to 20 per cent+ levels on new product launches, ramp up at China joint venture and UK capacity expansion,” said Credit Suisse, which maintained its outperform rating on Tata Motors with a price target of ₹650.
Echoing similar views, Spark Capital, which also maintains its buy rating with a price target of ₹650, said: “We retain our positive stance on Tata Motors driven by expected robust volume growth in JLR (new launches and growth in China).”
Rajasekhar of Cholamandalam Securities said: “With anticipated recovery of domestic CV market, a slew of new product launches and sustained momentum in JLR business, we continue to maintain a positive stance on the long-term prospects of the stock.”
China may dragHowever, analysts cite significant slowdown in China, delayed revival in demand, high interest rates and commodity prices could be key risks.