Tata Motors weak Q1 results and missed estimates has caused the company's share price to fall sharply, and this has got analysts excited: HDFC Securities, Motilal Oswal and Prabhudas Lilladar all have issued buy calls on the stock with high upside estimates. Analysts estimate that the weak Q1 performance this financial year is a one-off.
Lower JLR margins as well as lower volumes, higher costs for launches and rise in employee expenses all impacted results. But analysts say the things to watch are: 1) an improving model mix with a ramp-up in sales of new launches. The company has planned 6 new product launches in its M&HCV portfolio 2) Capital expenditure for JLR to reduce post the Slovakia plant going live 3) EBITDA margins rising back over 10% in the longer-term 4) GST transition and production delays likely resolved going forward.
Tata Motors management has cautioned that margin pressure will continue in FY18, keeping EBITDA in the range of 8-10% in the medium term.