Neutral TATA Motors; target of Rs 755: Motilal Oswal

Motilal Oswal's research report on TATA Motors

In 3QFY25, while JLR's EBIT margins improved YoY to 9%, we note here that the bulk of its margin improvement has been driven by a reduction in depreciation. Further, margins in India CV and PV businesses were boosted by PLI accruals for 9M, which aided margins by 90bp and 150bp for these segments, respectively.
We expect margin pressure to persist at JLR over FY24-27E, given: 1) weak demand in key regions, 2) rising cost pressure as it invests in demand generation, and 3) EV ramp-up, which is likely to be margin-dilutive. Even in India, both CV and PV businesses are seeing a moderation in demand. We cut our EBITDA estimates for Tata Motors (TTMT) by 3%/5% over FY25/FY26 to factor in the weakness in JLR business. For lack of any triggers, we reiterate our Neutral rating with a Dec’26E SoTP-based TP of INR755.

Outlook

We reiterate our Neutral rating with a Dec’26E SoTP-based TP of INR755.