Thursday, 10 August 2017

Tata Motors Shares fall 6% to hit Nearly 16-Month low on weak Earnings

Shares of Tata Motors Ltd on Thursday fell as much as 6.1% to hit nearly 16-month low as many brokerages reduced their target price for the stock after the company reported weaker earnings in both Jaguar Land Rover (JLR) and Indian operations.

The stock hit a low of Rs391.25 a share, a level last seen on 24 May 2016. At 10am, the scrip was trading at Rs393.65 on the BSE, down 5.5% from its previous close.

So far this year, it has fallen 16.8%. Tata Motors DVR fell 6.4% to Rs226.90, while India’s benchmark Sensex Index fell 0.42% to 31,665.44 points.

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JLR reported £442 million earnings before interest, tax, depreciation and amortization (Ebitda) in the June quarter, down 34% year-on-year and below brokerage firm Kotak Institutional Equities estimates of 27% due to higher realised forex losses which was at £545 million against the analyst estimates of £314 million.

Ebitda margin declined 460 basis points to 7.9% against the analyst estimates of 13.5%.

On the domestic front, a sharp drop of 34% in medium and heavy commercial vehicle sales led to a loss of Rs466.85 crore for the stand-alone entity against a profit of Rs34 crore a year ago.

“The quarter reflects mounting pressure on JLR’s profitability with limited currency related benefits, elevated discount levels and increasing investments in technologies/products. We believe the pressure points on JLR could continue. This more than offsets the benefits from new product launches in our view,” said IDFC Securities in a note to its investors.

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