Analysts expect bumpy ride for Tata Motors in near-term

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Moneycontrol Bureau

Tata Motors shares fell over 2% on Friday, after investors were disappointed with the lower-than-expected results in the first quarter and several analysts warned that near-term outlook remained cloudy for the firm, which is India's largest commercial vehicles maker and also owns the British luxury Jaguar Land Rover unit.

Tata Motors  first quarter consolidated net profit rose 12% year-on-year at Rs 2,245 crore. But it missed analysts expectations due to a foreign exchange loss and slow sales in the domestic market. The firm reported a consolidated revenue of Rs 43,324 crore in April-June, up 30% from a year ago.

"JLR sales are likely to remain weak in the near term. In China, JLR growth may slow as buyers push back Range Rover (RR) purchases in anticipation of the new version. Consequent to that, discounts and incentives on key models such as RR and Jaguar XJ models may increase in Q2.  On the other side of the globe, for instance in the US, not only is demand softening for everyone, but there is a clear shift of demand to lower-end models, impacting realization and margins. This is likely to impact sales and margins in Q2 as well, and keep the stock under pressure in the near term," said Yogesh Aggarwal of HSBC Securities and Capital Markets.

IDBI Capital analyst Bhaumik Bhatia also echoed similar views warning that in the near term, slowing momentum in JLR volumes and resultant margin pressures, along with subdued business in India for medium and heavy commercial vehicles and passenger cars would act as overhang on the stock.

Despite the near-term worries, both analysts are bullish on the company's long-term growth, as sales momentum should pickup post new model launches by JLR as well as by Tata Motors in India.

JLR, for instance, will launch a new Range Rover Sport, and in India, Tata Motors will launch the ultra range of small trucks and a CNG version of the Nano car apart from continued product refreshes.

HSBC has cut its FY13 earnings estimates for Tata Motors by 4%, but remains "overweight" on the stock with a Rs 320 target price and IDBI Capital also has a "buy" with a target price of Rs 290.

Edelweiss Capital's Sachin Gupta and Ashish Poddar also maintained a "buy" on the stock, citing a favourable outlook and inexpensive valuations.

But some analysts are more sceptical about the road ahead.

Credit Suisse, for instance, downgraded Tata Motors to "underperform" from "neutral" after cutting volume estimates for JLR and it also expects JLR's margins will decline due to pricing pressures in several markets.

Kotak Institutional Equities also expects JLR EBITDA margins will decline over the next few quarters due to higher contribution of lower-priced Evoque, Jaguar XF and Land Rover Freelander in the product mix and deterioration in pricing in Europe. 

The Range Rover is being phased out before the new launch in Q3 and hence volumes of highly profitable Range Rover would be significantly lower in the second quarter, according to Kotak Analysts Hitesh Goel and Vinay Kumar. They have cut their consolidated earninge estimates for FY2013-14 by 3-14%.

Tata Motors shares were down 2.6% at Rs 233.20 on NSE in morning trade on Friday.

Also Read: Book profits on Tata Motors on every rally: StanChart Sec

Nachiket Kelkar
nachiket.kelkar@network18online.com