Shares of Tata Motors traded with strong gains Wednesday after the company beat the most optimistic profit estimates in the third quarter.
Tata Motors stocks traded 6.6% higher at Rs 285.60 at 1005 hours on the Nifty index. In contrast, the Nifty index was up 66.7 points or 1.23% at 5,482.75.
Consolidated net profit jumped 40.5% at Rs 3,406 crore against Rs 2,424 crore year-on-year while net sales jumped 42% at Rs 45,109 crore against Rs 31,762.67 crore (YoY). A poll of brokers conducted by NDTV Profit had estimated net sales to grow at Rs 42,691crore and net profit at Rs 2,733 crore.
Ajay Shethiya, Research Analyst at Centrum Broking told NDTV Profit that the excellent numbers posted by the company were on the back of Jaguar and Land Rover (JLR) profitability. Tata Motors had acquired JLR in 2008.
"The sequential realization has grown 1%. Contribution from Freelander has come down to 13% against 22% but Evoque's contribution has jumped to 34% from 11% (QoQ)," Shethiya said. The 19% margins achieved in the quarter is not sustainable, but 15.5-16.5% looks sustainable, he added.
However, pressure on domestic passenger vehicle portfolio is likely to continue, Shethiya said. "One negative as far as passenger vehicles are concerned in Nano sales... They have to do 12,000-13,000 Nano sales every month to break even in their Gujarat factory," he added.
Most brokerage firms turned bullish on the stock after strong performance in the third quarter.
CLSA: upgrade to outperform, target 310Upgrade JLR’s FY13-14 EBITDA estimates by 27-29%
FY13 volumes assume 6% growth for non-Evoque models
Strong volume outlook post success of the Evoque
New LCV platform in FY13 to boost India volumes
JP Morgan: Overweight, target 320Remain positive on the volume growth outlook for JLR
Pricing trends remain healthy for premium OEMs
Raising volume estimates by 7%
Morgan Stanley: Overweight, target 313Markets not pricing the upside to JLR margins
Bull case offers 33% upside from current levels
Attractive risk-reward at current levels
JLR set for another strong year
Macquarie: Outperform, target 330Raise FY13E earnings estimates by 18%
Now factoring a higher margin of 15.8% for JLR
JLR – strong positive FCF despite rise in investments