JLR chip shortage! Tata Motors shares continue to decline, stock down 10% since Monday – Check what Nomura, Jefferies say

Tata Motors shares extend decline for the third straight day in a row on Thursday, however, it had gained marginally at close yesterday after briefly trading at downside. The scrip slumped over two per cent to Rs 310 per share on the BSE intraday trade today amid the JLR chip shortage concerns.

Tata Motors on Wednesday held a conference call with investors to revive their sentiments, wherein it clarified that the chip shortage is an industry issue, and the company has no plans to delay launches.

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The company on Tuesday in its filing to exchanges had said that the UK-based subsidiary Jaguar and Land Rover (JLR) sees negative EBIT margin in the second half of the financial year 2021-2022, as well as the premium vehicle company is going through semiconductor chip shortage.

The stock at around 11:00 am was trading nearly 2 per cent lower to Rs 311.2 per share on the BSE as compared to a 0.23 per cent decline in the S&P BSE Sensex. The scrip has declined over 10 per cent since Monday from Rs 346.05 apiece on a closing basis.

Brokerages are divided on the counter, as Nomura maintains a Neutral stance while Jefferies gives a Buy call for the stock, the former set a target of Rs 353 a share, while the latter being ambitious expects Tata Motors shares to grow Rs 435 per share from the current levels.

Nomura expects the company’s H2 margin and cash flow performance to be significantly better than the first half of the financial year 2021-2022, while it also expects some impact of the chip shortage to continue in the second half of FY22.

Despite some near-term pressures, Jefferies believes in a strong turnaround for Tata Motors. It adds, JLR is sanguine on demand and ability to deliver margin once shortages ease, moreover, JLR’s new launch pipeline also remains intact.

Tata Motors is one of the favourite stocks of an ace investor Rakesh Jhunjhunwala with a holding of 1.3 per cent which is around 42,750,000 shares of the company as of March 2021, as per BSE data