Tata Motors shares jumped 2% to their day's high of Rs 821 on the BSE today after the firm reported that its consolidated net profit for the quarter ended September 2024 fell 11.18% year-on-year (YoY) to Rs 3,343 crore. This was much lower than Street estimates of Rs 5,038 crore.

During the quarter, its revenue also dropped 3.5% YoY to Rs 101,450 crore.

Amid a challenging external environment, its EBITDA margin fell 230 bps YoY to 11.4%mand 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% to £6.5 billion due to temporary supply constraints, which resulted in 220 bps fall in EBIT margins to 5.1%. Commercial vehicle revenues were down by 13.9% 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% but EBITDA margins were steady at 6.2% (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.

Should you buy, sell, or hold Tata Motors's stock? Here's what analysts say:

CLSA

CLSA upgraded Tata Motors to 'Outperform' from "Hold' while lowering the target price to Rs 968 from Rs 975. 

The company's EBIT margin guidance for Jaguar Land Rover (JLR) at 10% in FY26 remains unchanged. Management has expressed caution regarding commercial vehicles (CVs), but new launches in the passenger vehicle (PV) segment are expected to drive growth. CLSA notes that the negatives are already priced in, and JLR's free cash flow (FCF) for the second half of FY25 is expected to benefit from multiple tailwinds.

Jefferies

Jefferies has maintained a 'Buy rating on Tata Motors but reduced the target price to Rs 1000 from Rs 1330 following a weaker-than-expected Q2 performance.

The company faced challenges with JLR due to tough macroeconomic conditions in China and Europe, coupled with aluminum supply constraints and delayed shipments. However, Jefferies anticipates a stronger performance in the second half of the fiscal year, with JLR upholding its F¥25 margin guidance. While demand for both commercial vehicles (CV) and passenger vehicles (PV) in India has slowed, CV profitability has remained resilient.

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Published on Nov 11, 2024, 09.57 AM IST