Tata Motors shares fall on Wednesday for 2nd day in a row – Check what brokerages say on this Rakesh Jhunjhunwala stock

The shares of Tata Motors continue to decline for the second day in a row as the company’s arm Jaguar and Land Rover (JLR) sees a negative EBIT in the second quarter of fiscal 2022 and issues concerns over shortage of semiconductor chips.

The stock tumbled by nearly 3.5 per cent to Rs 306.3 per share on the BSE intraday trade. At around 9:55 am it was by down over 2.5 per cent at Rs 308.7, gaining some lost ground.

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On Tuesday, the counter which was positive for the entire trading session declined by 10 per cent on the intraday basis almost an hour before market closing time amid JLR’s quarterly update. The stock closed around 8 lower to Rs 316.95 per share on the BSE yesterday.

Tata Motors in its filing to exchanges on Tuesday said JLR expects an operating cash outflow of about £1 billion, with negative earnings before interest tax (EBIT) margin in the second quarter ended September 2021, due to supply constraints. 

Tata Motors arm also expects chip supply shortages in the Q2FY22 to be greater than in the first quarter, potentially resulting in wholesale volumes to be about 50 per cent lower than planned.

In this regard, Morgan Stanley maintains an equal-weight call on Tata Motors and downgrades the target at Rs 300 per share. The brokerage says, the impact of chip shortage at JLR much more than it had anticipated. It adds, the key to monitor is that the demand environment in H2FY22 remains healthy.

Given negative FCF, Nomura’s FY22 debt assumptions have an upside risk, it raises the target to Rs 353 per share, with a Neutral stance. It says, the chip shortage issue much higher than expected, moreover, there is a risk of delayed launch of the new Range Rover too.

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