Tata motors shares fall nearly 5% on lower-than-expected JLR wholesale volumes

Tata Motors shares fell 4.62% to Rs 393.15 on Monday after the firm announced a lower-than-expected quarterly wholesale volume growth of 4% at 75,307 units (excluding China JV) for the September quarter. However, JLR‘s retail sales for Q2FY23 were 88,121, up 12% QoQ, mostly due to growth in the Chinese, and North American markets.

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Tata Motors stated that this improvement was lower than projected, owing to a lower-than-expected supply of specialised chips from one supplier that could not be quickly re-sourced in the quarter.

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“This was mitigated partially by further prioritisation of production to the highest margin products, while new agreements with semiconductor suppliers are expected to enable sales improvements in the second half of the fiscal year,” the company said in a press release.

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Tata Motors said that its products continue to be in high demand, with worldwide retail orders establishing new highs in the quarter. The overall order book has expanded to 205,000 units as of Q2FY23, an increase of roughly 5,000 orders from Q1FY23.

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“Wholesale dispatches come as a negative surprise to us and were significantly lower than the commentary issued by Tata Motors setting 90,000 wholesales target during Q1FY23 call,” ICICI Securities said.

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“All three businesses of Tata Motors are in recovery mode. While the India CV business will see a cyclical recovery, the India PV business is in a structural recovery mode. JLR is also witnessing a cyclical recovery, supported by a favourable product mix. However, supply-side issues will defer the recovery process. While there will be no near-term catalysts from the JLR business, the India business (~50% of SoTP) will see a continued recovery. The stock trades at 16.3x FY24E consolidated EPS and 2.8x P/B,” Motilal Oswal Financial Services said in a company update. The brokerage firm maintains a ‘buy’ rating on Tata Motors with a target price of Rs 510 per share.