Tata Motors shares jump over 4% on JLR volumes, revenue growth; should you buy?

Tata Motors shares rallied as much as 4.2 per cent on Monday despite the automaker reporting 56.97 per cent year-on-year fall in consolidated net profit figures at Rs 2,260.40 crore for the quarter ended June 30, 2016 as compared to Rs 5,254.23 crore in the corresponding quarter a year ago. Shares rallied on strong volume growth and margins, which analysts have given a thumbs up.

At 10.26 am, share price of the company was trading 3.69 per cent up at Rs 522.25. The scrip opened at Rs 520 and touched a high and low of Rs 525.30 and Rs 515.80, respectively. Later, the scrip ended 4.18 per cent up at Rs 524.70.

Tata Motors in a BSE filing on JLR growth said, “Jaguar Land Rover wholesale and retail numbers stood at 120776 units and 118704 units for the quarter ended June 30, 2016. China JV wholesales and retail were 13558 units and 14059 units. Overall retail sales were up in all region reflecting strong sales of the Discovery Sport, XE and F-PACE – North America up 17 per cent, UK up 18 per cent, China up 19 per cent, Europe up 16 per cent and overseas market up 6 per cent.” While maintaining ‘Buy’ rating on the stock with a revised target price of Rs 600, Religare Capital Markets said,”Tata Motors’ consolidated revenues inched up 9 per cent YoY to Rs 65900 cr while PAT slid 61% to Rs 1900 cr. The profit decline was driven by below-expected JLR margins at 13.8%. Standalone EBITDA margins were strong (6.7% vs. RCMLe 6.3%), even as higher depreciation and lower other income pulled down profits to Rs 1bn.”

The brokerage house further added that standalone margins at 6.7 per cent beat estimates as the automaker posted above-expected EBITDA margins of 6.7 per cent, up 60bps YoY as gross margins expanded 150bps YoY on lower costs.

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