Tata Motors Q4 fallout: Share price plunges, but here is why you should buy

Tata Motors share price slipped over 7 per cent on Thursday after the auto major reduced its net loss to Rs 499.94 crore during the March quarter of 2017-18 as compared to Rs 805.93 crore reported in the corresponding period of 2016-17. On a consolidated basis, Tata Motors reported a decline in its Q4 net profit to Rs 2,176.16 crore from Rs 4,336.43 crore.

Reacting to its quarterly earnings, the stock slipped as much as 7.13 per cent to Rs 287.20 on the BSE.

"Tata Motors consolidated net profit declined by 51 per cent yoy in Q4 FY18 due to an impairment provision made on intangibles and capital work in progress, while adjusted consolidated EBITDA was largely in line with our estimates," said brokerage Kotak Securities in a research note.

The brokerage retained its buy rating on the stock with a target price of Rs 445 from Rs 465 earlier. "We believe the management is on course to improve operating margins in both standalone and JLR businesses led by cost-reduction initiatives. We retain BUY rating on attractive valuations and tweak our TP to Rs 445 from Rs 465 earlier. 

Global brokerage Jefferies also maintained its buy rating on the stock, but revised TP to Rs 440 from Rs 510 earlier. "JLR and standalone EBITDA missed our estimate By 7 per cent. Near-term demand outlook for JLR remains challenging for standalone business. Outlook is strong as macro and market share trends improve. besides, undemanding valuation post steep correction makes risk-reward favorable," said Jefferies in a results preview report.

For the full financial year, Tata Motors reported a standalone net loss of Rs 1,034.85 crore from a net loss of Rs 2,429.60 crore. The company`s consolidated net profit for 2017-18 increased to Rs 9,091.36 crore from Rs 7,555.56 crore for the previous fiscal.

"In the domestic business, the 'turnaround' results are clearly visible. We gained market share in both CV and PV with strong improvement in profitability and positive cash flows," said Natarajan Chandrasekaran, Chairman Tata Sons.

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"With 'Turnaround 2.0' we will accelerate our efforts to 'Win Decisively' in CV, 'Win Sustainably' in PV and embed the turnaround culture in the company. With these focused efforts, I am confident that Tata Motors Group shall deliver Competitive, Consistent and Cash Accretive Growth in the coming years," he added.

Besides, the company reported that for the fiscal year 2018, its subsidiary Jaguar Land Rover's retail sales grew 1.7 per cent year-on-year to 614,309 cars due to healthy demand in China, North America and in overseas markets.

JLR's revenues increased by 6 per cent to £25.8 billion, while pre-tax profits were £1.5 billion including a one-off £437 million pension credit reported in the first quarter partially offset by engineering charges in Q4 FY18.