Shares of Tata Motors are in focus again amid reports that the UK economy is on the brink of recession. Tata Motors’s UK arm Jaguar Land Rover (JLR) contributes 67 per cent to the revenues of the Indian auto firm. JLR clocked 6 per cent lesser retail sales compared to its peers for the quarter ended June. Audi, BMW, and Mercedes Benz clocked about 3.5 per cent more sales during the same period. Retail volumes in the JLR segment stood flat on a sequential basis at 67,824 units (excluding joint venture with China).
Meanwhile, economists in the UK said the economy was already in recession and PM Liz Truss’s energy support package was unlikely to lift it out of its slump anytime soon. The weak GDP data in July has prompted experts to raise the recession alarm. Gross domestic product (GDP) rose 0.2 per cent in July, lower than forecasts, but much higher than June’s sharp 0.6 per cent contraction.
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The Tata Motors stock has lost 7.18 percent this year, signaling that the scrip has been affected by negative cues emanating from the Russia-Ukraine war and the economic slowdown after Covid-19 lockdowns across the world.
However, shares of Tata Motors have gained 43.52 per cent in a year. In today’s session, the stock was trading 0.69 per cent lower at Rs 447.10 against the previous close of Rs 450.20. Tata Motors shares are trading higher than 100-day moving averages but lower than 5-day, 20-day, 50-day and 200-day moving averages.
Total 5.43 lakh shares of the firm changed hands amounting to a turnover of Rs 24.45 crore on BSE. The market cap of the firm stood at Rs 1.48 lakh crore on BSE. The stock hit a 52-week high of Rs 536.50 on November 17, 2021 and a 52-week low of Rs 293.05 on September 21, 2021.
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The company’s Q1 loss widened to Rs 4,951 crore in the quarter ended June 2022 against a consolidated net loss of Rs 4,450 crore in the corresponding quarter of last fiscal. Consolidated revenue from operations in Q1 stood at Rs 71,935 crore as against Rs 66,406 crore in the year-ago period.
On a standalone basis, Tata Motors reported a net loss of Rs 181 crore against a net loss of Rs 1,321 crore in the year-ago period. Revenue from operations stood at Rs 14,874 crore in Q1 as against Rs 6,577 crore in the same period a year ago.
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Here’s a look at what analysts said about the outlook of the stock if recession in the UK impacts Tata Motors’ UK arm in the near future.
Ravi Singh, vice president, head of research, Share India
“As per the company, JLR faces headwinds due to lockdowns in China for Covid-19, the global supply chain issues in its UK subsidiary caused by the war in Ukraine and difficult macroeconomic conditions. These problems may impact JLR financially in FY23. However, in India, company’s vehicles across commercial vehicle and passenger vehicle segments including EVs remained robust, which positively impacted Tata Motors sales in the short term. The stock price may show some strength to touch the levels of Rs 500 till Diwali amid festive demand. The long-term outlook of the stock remains weak citing the JLR’s sales which contributes a majority of chunk to Tata Motors revenue.”
Manoj Dalmia, founder and director, Proficient Equities
“JLR contributes 67% to the revenues of Tata Motors. The sales volume has also decreased there by 38% (wholesale volume) and 24%, in case of retail volume. There are other nations contributing to its revenues as well although, there is some slowdown in demand taking place. The stock looks weak for the time being and we might see some resistance at Rs 467 levels from where the stock can face some selling pressure. We can see some fall till Rs 425 levels if the stock starts retracing at those levels.”
AR Ramachandran, Co-founder & Trainer, Tips2Trades
“Despite severe headwinds faced by the Eurozone due to very high inflation and poor growth performance, Tata Motors has so far held on to its support base of┬а Rs 440. Tata Motors needs to close above┬а Rs 463 on the daily charts for a strong uptrend up to┬а Rs 520. Investors can hold long-term buy positions with a stop loss of┬а Rs 440.”
Ravi Singhal, CEO, GCL
“As we can see, the eurozone may enter a recession as a result of the energy crisis, and interest rate hikes will continue. China’s economy is also steadily declining. The stock may fall below┬а Rs 400 in the coming weeks.”
Rajesh Sinha, senior research analyst, Bonanza Portfolio
“Tata Motors stock is down almost 7% in a month mainly due to a spike in the commodities cost and loss in production. However, it advanced almost 19 per cent from the lows of June 2022. In June quarter, losses widened at the consolidated level to Rs 4,951cr due to a steep rise in commodity costs and loss in production due to shortage of semiconductors. Still, the company is bullish and expects demand to remain strong in future despite inflationary and geo-political challenges. With the launch of various new products, Tata Motors has been able to change its perception from what it was viewed as few years ago. Tata Motors is the largest EV player in India and with the kind of models they are coming up with, it shows that they have improvised to a great extent from what it was used to do before. Its JLR models are getting revamped and with the launch of EVs, JLR is going to lead the world in EV play. On the other hand, Tata Chemicals is working on making sodium-ion batteries apart from lithium-ion ones and has also set up a plant in the UK. Tata Motors is also planning to invest in chip making capabilities. If chip and batteries businesses become productive along with its own capacity in metals space, Tata Motors will be able to benefit from economies of scale.┬а However, Bank of England has warned that the UK will fall into recession as it raised interest rates by the most in 27 years. If this happened, Tata Motors’ sales will definitely get impacted significantly.”
