Shares of Tata Motors slipped 3 per cent in early trade to today’s low of Rs 901 after Jaguar Land Rover (JLR), a subsidiary of Tata Motors, reported a 3 per cent decline in retail sales, with 1,03,108 units sold during the second quarter of FY25 compared to the same period last year.
JLR said retails were higher in North America (up 9 per cent YoY) and UK (up 29 per cent YoY), but lower in Europe (down 22 per cent YoY), China (down 17 per cent YoY), and overseas (down 6 per cent YoY).
“We expect both production and wholesale volumes to pick up strongly in the second half of the financial year as the aluminium supply situation normalises,” the company stated.
On Monday, Tata Motors’ shares closed at Rs 928.1, down 0.28 per cent on the BSE, while the benchmark Sensex fell 0.78 per cent. Its shares have surged 17 per cent in 2024 to date and 125 per cent over the past two years, with the company currently holding a market capitalization of Rs 3,41,622 crore.
In Q1 FY25, Tata Motors reported a 74 per cent YoY growth in its consolidated net profit at Rs 5,566 crore. Its revenue from operations during the first quarter rose 6 per cent YoY to Rs 1.08 lakh crore but was below the Street estimate of Rs 1.15 lakh crore.
Meanwhile, the company clocked an EBIT (earnings before interest and tax) at Rs 9100 crore, with EBIT margin of 8.4 per cent, which improved 30 bps YoY. The profit before tax (PBT) for the segment stood at Rs 1,500 crore.
Analysts said the JLR commentary around volume rebound is encouraging but divergent from luxury peers, who have recently downgraded their outlooks, citing demand weakness in China.
Emkay Global has reaffirmed its positive outlook on the stock, given the structural improvements across operational parameters at JLR — it is on track for becoming net-debt free in FY25E. The brokerage is positive on Tata Motors’ healthy India outlook, particularly in CVs, amid impending cyclical recovery and strong margin uptick.
“Tata Motors’ balance sheet is healthy with least-demanding valuations among OEMs. We cut FY26E/27E EPS by 2 per cent (5 per cent/10 per cent revenue/PBT CAGR) on slight margin reduction, and reiterate BUY with unchanged target price of Rs 1,175 per share,” Emkay Global said.
MOFSL expects JLR’s margins to remain under pressure over FY24-FY26, given the rising cost pressure as it invests in demand generation; normalizing mix; and EV ramp-up, which is likely to be margin-dilutive.
Even in the Indian business, both CV and PV businesses are experiencing moderation in demand, it noted adding that it is factoring in flat margins for the Indian business over its forecast period.
“While there is no doubt that Tata Motors delivered an extremely robust performance across its key segments in FY24, the above mentioned headwinds could hurt its performance going forward. The stock trades at 16 times/13 times FY25E/FY26E consolidated EPS and 6 times/5 times EV/Ebitda. We reiterate Neutral with our June’26E SOTP-based target price of Rs 990,” it said.
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