The share price of Tata Motors gained over 5 percent in the early trade on Wednesday after the company reported better-than-estimated operating performance in the September quarter with Jaguar Land Rover (JLR) returning to profit with significant positive cash flow.

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The shares gained as much as 5.49 percent to an intraday high of Rs 143.15 apiece on the BSE. At 11:33 am, the stock was trading 3.17 percent higher at Rs 140 per share.

The country's largest commercial vehicle maker Tata Motors posted a consolidated loss of Rs 314.5 crore in Q2FY21 as against CNBC-TV18 poll estimates of Rs 1,290 crore loss. The company had reported a loss of Rs 216.56 crore in the year-ago quarter.

Consolidated revenue fell 18.2 percent YoY to Rs 53,530 crore.

“Despite concerns around the risk of a second wave of infection in many countries and other geopolitical risks, we expect a gradual recovery of demand and supply in the coming months,” Tata Motors said in an exchange filing.

The company’s UK-based subsidiary Jaguar Land Rover (JLR) reported revenue at 4.4 billion pound, up 52.2 percent, QoQ, but down 28.5 percent from a year-ago period.

“Jaguar Land Rover returned to profit with significant positive cash flow in the quarter as sales and revenue recovered from the impact of COVID-19 in fiscal Q1 but remain below pre-COVID levels a year ago,” Tata Motors said.

It generated a 65 million pound profit before tax (PBT) in the second quarter, up significantly from a loss of 413 million pound in the prior quarter but lower than the pre-COVID PBT of 156 million pound a year ago.

Here’s what brokerages have to say:

CLSA

Tata Motors’ 2QFY21 results were significantly higher than CLSA and consensus expectations as both JLR and India surprised on margins. Both businesses turned FCF (free cash flow) positive (in-line with guidance) and management remained upbeat on 2H. "We remain constructive on Tata Motors due to its renewed focus on controlling costs and investments. We expect the sequential volume recovery to continue for both India and JLR which should drive FCF generation and deleveraging," it said.

"We raise our FY21-23 Ebitda forecasts 2 percent and FCF from Rs 220 billion to Rs 239 billion," the brokerage added.

CLSA maintained a 'Buy' rating with a target price of Rs 220 (62 percent upside).

Citi

"Tata Motors' Q2 numbers were ahead of estimates. The company’s JLR and India businesses have seen improving volumes. Better ASPs and cost reduction should improve JLR margin."

Citi maintains a 'Buy' rating with a target price of Rs 185 per share.

ICICI Securities

"We believe improving capex efficiency across businesses would be critical; access to incremental capital should be contingent on the business segments' right to win. For India business, non-core asset sale, potential investment from new partner in domestic PV business will also be strong levers to deleverage. The core CV business in India is at trough demand while green shoots are visible coupled with market share gains in PVs. JLR’s performance in FY22 is likely to driven by new products (Defender) coupled with continued cost reduction success," said the brokerage.

ICICI Securities maintains a 'Buy' rating on the stock and has raised the target price to Rs 197 from Rs 131 earlier.

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