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JLR sales are still down but analysts say Tata Motors is healing

  • Tata Motors has reported that its luxury car brand, Jaguar Land Rover, continues to be hurt by the ongoing semiconductor shortage.
  • Although the situation has eased a little, JLR’s retail sales continue to be hammered by the shortage, with sales falling nearly 40% in the December quarter.
  • Despite this, analysts remain divided on Tata Motors’ prospects, with the outlook spread across a spectrum of neutral, sell and buy.

The semiconductor shortage is still chipping away at the sales of Tata Motors-owned luxury car maker Jaguar Land Rover. Tata Motors reported a nearly 40% decline in JLR sales in three months ending December 2021, compared to a year ago. And, that was more cars than what it sold three months earlier.
Tata Motors share price since October, 2021BSE / Business Insider India / Flourish

According to an exchange filing, JLR sales stood at 80,126 units in the December quarter, down 37.6% when compared to the same period a year ago.

The company is still confident that this too shall pass. “Underlying demand for JLR products remains strong and the company has proactively managed semiconductor supplies to maximise production of higher margin products,” Tata Motors said in an exchange filing.

On a sequential basis, JLR is facing headwinds in both China and Europe, with sales down 6.9% and 6.8%, respectively. However, wholesale sales are chinning up with an increase of 8% in the same period. Essentially, dealers are stocking up more cars than those actually sold, hoping for more buyers to return sooner than later.

 

What are the analysts saying?

Despite JLR continuing to be a drag on Tata Motors’ overall performance, analysts are not completely negative on the company’s outlook.

Bank of America gave the stock a neutral rating while observing that JLR’s volumes continue to disappoint, but the positive sales mix helped the company report a positive cash flow (£150 million).

The easing of semiconductor shortage is visible in JLR’s output too. Production increased to 72,184 units, up 41% in the last three months. Its orderbook stood at 1,54,000 units, and the company’s cash flow was positive at £150 million (approx. ₹1,520 crore).

CLSA, while stating that cash flow and profitability are expected to improve due to an increase in volumes, it maintained that the retail performance was ‘significantly’ lower.

Brokerage Recommendation Target price
Bank of America Neutral ₹525
CLSA Sell ₹408
Emkay Buy ₹550
Sharekhan Buy ₹610
ICICI Direct Buy ₹530

 

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