Tata Motors slipped 8 per cent to Rs 174 on the BSE in intra-day trade after the automaker reported a 47 per cent drop in net profit at Rs 1,117 crore for March quarter (Q4FY19). Consolidated revenue was down 4 per cent at Rs 86,422 crore on year-on-year (YoY) basis. Ebitda (earnings before interest, tax, depreciation and amortisation) margin came in at 9.4 per cent, down 258 basis points (bps) YoY and up 151bps on quarter-on-quarter (QoQ) basis.
The Q4 results were disappointing as the company struggled to sell its luxury Jaguar Land Rover (JLR) cars in key markets like China, and was also hit by a broader economic slowdown at home.
Guenter Butschek, CEO and MD at Tata Motors said that Q4FY19 has been extremely tough with market sentiment remaining muted, impacting demand across segments. The industry outlook is not going to be anything different in the short-term due to multiple uncertainties.
Motilal Oswal Securities maintains ‘neutral’ rating on the stock as the brokerage believes FY21 could be a tough year for India and JLR (run-out of most profitable RR/RR Sport). Further, the noise around electrical vehicles (EVs), Brexit and trade-war add to the uncertainties, it added.
“We remain concerned over near-term volume pressures, especially in China, where we expect no growth in FY20. While uncertainty continues in the UK and US markets, we are impressed by JLR’s outperformance there. Company-specific initiatives have started to bear fruit with project charge (cost-cutting initiatives) being ahead of target (first GBP 1.3bn of GBP 2.5bn target delivered),” analysts at Elara Capital said in the results review note.
Analysts at Antique Stock Broking believes, although some of the altercation done by the company to remove volatility in cash flow and profit led by macro and cyclical headwinds has begun to show results, there is still a long way to go.
“We expect more drastic cost agility and lean operation actions from the JLR management without compromising much on the heart of the business (product and technology investments). As Tata Motors walks on sustainable cash flow recovery path, we believe Street will start to regain confidence on the company,” the brokerage firm added.