CLSA upgrades Tata Motors with Buy rating, sets target price at Rs 624 per share

This positive trend positions JLR for a promising year in FY24 if the European market rebounds as expected. File photo

Global investment banking firm, CLSA has upgraded its rating on Tata Motors to "Buy" and set a target price of Rs 624 per share. This positive outlook comes on the back of encouraging retail sales figures for Jaguar Land Rover (JLR) in April, with notable growth in the American and Chinese markets offsetting a decline in Europe.

JLR, a subsidiary of Tata Motors, reported substantial year-on-year improvement in retail sales during April. The company's strong performance in America and China has helped offset the challenges faced in the European market. This positive trend positions JLR for a promising year in FY24 if the European market rebounds as expected.

The catalysts 

The robust retail sales figures are driven by higher volumes and a richer product mix. The company's strategic focus on increasing sales in America and China has yielded favorable results, demonstrating Tata Motors' ability to adapt and capitalise on key markets.

Tata Motors' margin improvement and generation of free cash flow (FCF) are expected to be aided by the combination of higher volumes and a richer product mix. These factors, coupled with cost optimisation measures, will contribute to the company's overall financial performance and strengthen its position in the market, CLSA said.

Tata Motors posted a consolidated net profit for the quarter ended March at Rs 5,407 crore, against a net loss of Rs 1,033 crore in the same quarter last year. Revenue from operations came in at Rs 1,05,932 crore, up 35.05 percent from Rs 78,439 crore in the corresponding quarter last year.

The company in its outlook for the current financial year said it remains optimistic on the demand situation despite near term uncertainties and expect a moderate inflationary environment in the near term.

JLR financials

For Jaguar and Land Rover, revenue in Q4 came in at £7.1 billion, up 49 percent y-o-y as chip supply improved further. Wholesales in Q4 were 94,649 units, up 24 percent y-o-y.

EBIT margin for the quarter was 6.5 percent while its profit before tax and exceptional items was £368 million. Free cash flow in Q4 stood at £815 million, resulting in £1.3 billion in H2FY23 and £521 million for the full year.

Thus, net debt on JLR improved to £3 billion as of 31 March 2023 with cash of £3.8 billion and liquidity of £5.3 billion (including undrawn £1.52 billion revolving credit facility).

The company said its order book of 2,00,000 units remains strong despite increased retail sales.