Tata Motors, India's largest electric vehicle manufacturer, were off to a robust start on the bourses after rising 3 percent to Rs 829 despite reporting a weak set of numbers for the second quarter, completely missing expert estimates. The company's net profit fell 11 percent on-year to Rs 3,343 crore, driven by a weak performance at its Jaguar Land Rover (JLR) unit and in its commercial vehicles segment.
Further, Tata Motors posted a cautious commentary. "We remain cautious on near-term domestic demand," it said in the statement. "However, the festive season and substantial investments in infrastructure should help bolster it," it added.
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Despite its Q2 miss on all fronts, brokerages have remained bullish but have also slashed price targets on the automobile major.
CLSA has upgraded Tata Motors to 'Outperform' with a target price of Rs 968 per share, that is an upside of 20 percent from the last close. The brokerage firm noted that Tata Motors remains confident in its Jaguar Land Rover (JLR) guidance, projecting robust EBIT margins for FY25 and FY26. While the company is cautious about commercial vehicles (CVs), it expects growth to be driven by new launches in the passenger vehicle (PV) segment.
Also read: Tata Motors forecasts a better Q3 led by positive festive season; JLR maintains outlook
Nomura, maintaining its 'buy' rating on Tata Motors, has reduced its target price to Rs 900 from Rs 1,303 per share after a weaker-than-expected Q2 performance. However, the firm highlights that JLR’s guidance has been upheld, with a strong rebound anticipated in the second half of FY25. A recovery in India’s CV segment is also likely by Q4, while JLR’s performance has outpaced that of its peers across various markets.
Jefferies has also retained a 'Buy' rating on Tata Motors but revised its target to Rs 1,000 from Rs 1,330 per share. The firm reports that JLR is anticipating an improved second half and has maintained its margin guidance for FY25. However, Jefferies noted a slowdown in demand for both CVs and PVs in India and consequently reduced its FY25-27 earnings estimates by 2-9 percent.
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On the contrary, UBS has a 'Sell' call on Tata Motors, cutting its target to Rs 780 per share. According to UBS, JLR and CV segments have underperformed, although PV sales were in line with expectations. The brokerage expressed concerns over the quality of reported EBIT, which it found disappointing. Additionally, Tata Motors has lowered its free cash flow (FCF) guidance to £1.3 billion from a prior forecast of £1.8 billion.
The company is aiming for a strong lift in passenger vehicle retail growth, fueled by recent model rollouts and a targeted marketing push.
Management said that external challenges slowed things down in Q2, especially the flooding incident at the Nivelles facility, which limited production to 86,000 units. "Despite this, we still achieved solid profitability, underscoring the resilience of our business. We’re poised for a strong rebound in the second half," noted JLR CFO Richard Molyneux.
The Tata Motors stock price has corrected 23 percent in the last three months.
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