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Why Tata Motors share price rose over 7% today despite 50% fall in September sales

Tata Motors share price rose up to 7.07% intra day to Rs 123.5 compared to the previous close of Rs 115.35 on BSE.  

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Why Tata Motors share price rose over 7% today despite 50% fall in September sales
Tata Motors share price opened 2.09% lower at Rs 112 on BSE. The large cap stock has gained after three days of consecutive fall.

Tata Motors share price rose in trade today after its UK unit Jaguar Land Rover reported a 5% rise in US September sales. That neutralised the likely impact on Tata Motors stock movement after it logged a 50% decline in September sales. Tata Motors share price rose up to 7.07% intra day to Rs 123.5 compared to the previous close of Rs 115.35 on BSE.  

The Tata Group firm share opened 2.09% lower at Rs 112 on BSE.  The large cap stock has gained after three days of consecutive fall.

Tata Motors share has lost 46% during the last one year and fallen 29% since the beginning of this year.

The auto stock gained today after Jaguar Land Rover (JLR) reported a five percent (year-on-year basis) rise in US sales to 9,490 units in September 2019 on increase in sales of all-new Range Rover Evoque, Range Rover Sport and Jaguar F-PACE.

Also read: Rakesh Jhunjhunwala, wife Rekha earned Rs 483.75 crore with this stock in just four trading sessions

For the calendar year, Jaguar Land Rover clocked 89,071 units, an increase of three percent compared to 86,309 in 2018. In September, Jaguar sales fell two percent to 2,002 units. The Jaguar F-PACE continued to lead the brand's sales performance with 1,021 units sold, up thirteen percent from September 2018. The Jaguar E-PACE and XE sold 319 and 218 units, respectively.

Land Rover brand sold 7,488 units in US, an increase of seven percent from 6,966 units in September 2018. The new Range Rover Evoque clocked a 69 percent rise in September sales to 1,069 units. The Range Rover Sport saw sales of 2,288 units, an increase of 22 percent compared to 1,878 units in September 2018.

Meanwhile, JLR's parent Tata Motors continued its weak performance in September this year. Total domestic sales fell 50% to 32,376 units last month compared to 64,598 units in the corresponding  month of previous fiscal.

Also read: Maruti Suzuki, Hyundai, Honda, Tata Motors: Big festive discounts on offer as carmakers hope to revive sales

Commercial vehicles sales too declined 45.4% to 28,079 units compared to 51,419 units in September last year.

Mayank Pareek, president, passenger vehicles business unit at Tata Motors said, "Towards the end of the month, there was an encouraging response in terms of customer foot falls. The customers have responded well to our festive offers as reflected in 11% more retail in September 2019 compared with August. However, the industry continued to decline in September."

Financial performance

Over the years, the firm's financial condition has deteriorated.

Tata Motors share has a price to earnings (P/E) ratio of 46.92 compared to the industry P/E of 17.47. This indicates the stock is overvalued and investors are paying higher price for each Rs 1 of company's earnings. Earnings per share for the auto company have turned negative at the end of March 2019 fiscal for the first time in ten years.

Basic earnings per share (EPS) for fiscal ended March 2019 stood at Rs 84.89 in negative. For fiscal ended March 2009, basic EPS of the firm stood at Rs 48.74 in negative. For fiscal ended March 2018, basis EPS of the firm stood at Rs 26.46. Similarly, return on capital employed has been falling constantly since fiscal ended March 2011. Return on capital employed for March 2011 fiscal stood at 20.20%. For fiscal ended March 2019, it stood at 2.49%.

Return on assets ratio which indicates how efficiently a company can manage its assets to clock profits during the period paints a grim picture for the Tata Group firm.

For the fiscal ended March 2019, return on assets ratio turned negative to 9.38%. The ratio last entered negative territory for fiscal ended March 2009 when it stood at 3.37.

For the first quarter of current fiscal, Tata Motors reported a consolidated net loss of Rs 3,679.66 crore dented by muted volume growth in domestic business as well as in its British arm Jaguar Land Rover (JLR).

"The company had posted consolidated net loss of Rs 1,862.57 crore in June quarter of 2018 and profit of Rs 1,117.48 crore in March quarter 2019," Tata Motors said.

The company said profit was impacted by demand slowdown, higher axle loads, liquidity stress, low freight availability for cargo operators.

Consolidated revenue declined by 7.84 per cent to Rs 61,467 crore as compared to Rs 67,701 crore in the year-ago period.

Operating profit, or EBITDA (earnings before interest, tax, depreciation and amortisation) dipped 130 basis points (bps) YoY to 6.2 per cent, while EBIT margin plunged 170 bps to a negative 2.5 per cent.

By Aseem Thapliyal

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