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Tata Motors share price gained almost 3 per cent in morning trades on Monday. Should you stay invested in Tata Motors post Q2 numbers?
Should you stay invested in Tata Motors post Q2 numbers?
Tata Motors share price gained almost 3 per cent in morning trades on Monday and was among largest gainers in the Nifty 50 stocks on a day when benchmark indices traded in the Rd. While Tata Motors Q2 performance was subdued led by Weakness in Jaguar Land Rover margins, analysts say second Half FY25 should see improvement as margin challenges for JLR abate.
During the quarter, its revenue also dropped 3.5 per cent YoY to Rs 101,450 crore.
Amid a challenging external environment, its EBITDA margin fell 230 bps YoY to 11.4 per cent and the company said it remains cautious on near-term domestic demand.
“Growth in the quarter was impacted due to significant external challenges as highlighted earlier. Overall, the business fundamentals remain strong, and we remain focused on our agenda of driving growth, competitiveness and free cash flows. As the supply challenges ease and demand picks up, we are confident of steady improvement in our performance and delivering a strong H2,” Tata Motors CFO PB Balaji said.
During the quarter, JLR revenue was down by 5.6 per cent to £6.5 billion due to temporary supply constraints, which resulted in 220 bps fall in EBIT margins to 5.1 per cent.
Commercial vehicle revenues were down by 13.9 per cent but EBITDA margins improved to 10.8% (up 40 bps) on favourable pricing and material cost savings despite adverse volumes. Passenger vehicle revenues were down by 3.9 per cent but EBITDA margins were steady at 6.2 per cent (down 30 bps) through mix improvements and cost reduction actions.
Tata Motors said the festive season and substantial investments in infrastructure should help bolster it. “JLR wholesales are expected to improve sharply, as supply challenges ease. Overall, we expect an all-round improvement in performance in H2 FY25 and the business to become net debt free by this year,” it said.
Brokerage firm CLSA may have upgraded shares of Tata Motors to “outperform” post its September quarter results, but most of the other analysts have slashed their price targets on Jaguar Land Rover (JLR)-parent by as much as 30 per cent.
CLSA now has a target of Rs 968 on Tata Motors, saying that it has upgraded the stock post the recent correction. Shares of Tata Motors are down 32 per cent from its recent peak.
However, Tata Motors maintained the EBIT margin guidance for JLR of around 8.5 per cent for the current financial year and 10% for financial year 2026.
Nomura has maintained its “buy” rating on Tata Motors but has cut down its price target on the stock to Rs 900 from Rs 1,303 per share. It expects the India Commercial Vehicles business to recover in the fourth quarter of the current financial year, while also expecting a JLR rebound in the second half.
The brokerage also said that JLR’s performance across markets has been better than peers and that JLR maintaining its guidance is a key positive amidst concerns maintained by multiple global OEMs.
Jefferies has also maintained its “buy” rating on the stock but similar to Nomura, has slashed its price target to Rs 1,000 from Rs 1,330 earlier.
Tata Motors’ Earnings Per Shares (EPS) estimates have been cut by Jefferies by 2 per cent to 9 per cent respectively for financial year 2025 – 2027.
However, UBS maintained its “sell” recommendation on the stock with a price target of Rs 780. It said in its note that the quality of reported EBIT was disappointing as well, as the company had earlier revised its useful life of its ICE models, driven lower depreciation sequentially by £76 million.
UBS said that JLR’s management has maintained its margin guidance but that is contingent to demand not worsening any further amidst industry profit warnings.
Shares of Tata Motors had ended 2 per cent lower on Friday at Rs 803.55, having corrected significantly from its recent peak of Rs 1,179. The stock has also given up most of the gains of 2024 and is now flat on a year-to-date basis.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
