Tata Motors extends gain as JLR reports strong retail sales in May

Tata Motors was up 2.4% to Rs 312, extending its past two days 7% rally on the BSE, after Jaguar Land Rover (JLR) reported total retail sales of 48,281 vehicles in May 2018, up 6.1% year on year. The growth for JLR (Ex-China geography) stood strong at 11% YoY which has been highest growth in last 14 months.
The sales growth was primarily driven by the introduction of new models including the Range Rover Velar, the Jaguar E-PACE and the new Land Rover Discovery, Tata Motors said in a statement.

Thus far in the calendar year 2018, Tata Motors had underperformed the market by falling 34% as compared to 2.5% rise in the S&P BSE Sensex till Tuesday, June 5, 2018.

Analysts at Elara Capital believe Tata Motors is currently pricing in extreme pessimism of a flattish volume growth for JLR for FY19E.

“We have factored in a volume CAGR of 7% over FY19-20E for JLR. YTDFY19 retail volume growth for JLR stands at 9% with China yet to bounce back; while we remain watchful of Europe (-9% in YTDFY19) and UK growth sustainability (+23% YoY). The mgmt in their India business analyst meet too highlighted their path to sustained FCF and achieving EBIT margin guidance of 3-5%,” the brokerage firm said in company update.