Shares of Tata Motors Tumble Below ₹1000
In a dramatic turn of events, Tata Motors’ stock experienced a sharp decline of nearly 5.5% in early trading today, falling to ₹978.70 per share.
This drop marks the ninth consecutive day of losses for the automotive giant, pushing its stock below the ₹1000 threshold for the first time since late July.
UBS Issues ‘Sell’ Rating, Target Price Set at ₹825
The recent plunge follows a discouraging report from UBS Securities, reiterating its ‘Sell’ rating on Tata Motors’ stock.
UBS has set a target price of ₹825 per share, indicating a potential downside of 20.3% from Tuesday’s closing price.
The brokerage firm’s bearish outlook stems from growing concerns over its margins, particularly within its luxury arm, Jaguar Land Rover (JLR), and its domestic passenger vehicle segment.
JLR’s Margin Pressures and Declining Demand
UBS’s report highlights that while JLR’s focus on higher-margin models during the semiconductor shortage has enhanced its average selling prices and gross margins—from £49,000 and 26.7% in FY 2020 to £72,000 and 31% in FY 2024—this strategy may be hitting a snag.
The report notes a noticeable decline in demand for these premium models, with current orders dropping below pre-COVID levels.
As a result, UBS anticipates potential discounts on models like the Range Rover, signaling a possible slowdown in JLR’s recent success.
JLR’s Financial Performance and Market Concerns
JLR’s recent financial performance has been robust, with a revenue of £7.3 billion in the June quarter—the highest first-quarter revenue on record.
This represents a 5% increase compared to the same period in FY24. Despite this, the company’s cautious outlook for the rest of FY25 and production constraints due to seasonal plant shutdowns and supply chain disruptions have heightened market anxieties.
Impact of Q1FY25 Results on Tata Motors’ Stock
Since the release of its Q1FY25 earnings report at the beginning of August, Tata Motors’ stock has been on a downward trajectory.
Despite reporting solid figures, the company’s cautious management outlook has not been well-received by investors.
The stock ended August with a 4% decline and has continued its downward trend into September, plummeting 12%. From its peak of ₹1,176 per share, the stock has now fallen 17%.
Domestic Market Challenges and Strategic Responses
On the domestic front, Tata Motors is anticipating increased demand during the festive season.
However, recent passenger vehicle sales figures for August reveal a 3% year-over-year decrease and a 1% month-over-month drop, totaling approximately 44,500 units.
The market is currently experiencing reduced consumer spending, leading to an inventory buildup and prompting dealers to offer significant discounts.
To address these challenges, Tata Motors has ramped up festive discounts to as high as ₹2.5 lakh on various petrol, diesel, and CNG models, including SUVs.
Additionally, consumer benefits of up to ₹45,000 are being offered on popular models to stimulate sales and reduce unsold inventory.
Outlook and Investor Sentiment
Despite these efforts, there are concerns that the increased discounts could negatively impact profit margins.
Tata Motors is navigating a complex market environment with a mix of strategic discounts and operational adjustments.
Investors will be closely watching how these strategies unfold in the coming months and whether the company’s stock can stabilize amidst the ongoing challenges.
As Tata Motors grapples with these issues, the market will remain vigilant about any further developments and potential shifts in the company’s financial performance and stock trajectory.