Accumulate Tata Motors; target of Rs 757: KR Choksey

KR Choksey's research report on Tata Motors

In Q3FY25, TTMT revenue stood at INR 11,35,750 Mn, up by 2.7% YoY (+12.1% QoQ), missing our estimates by 4.9%. Total volume stood at 340,025 in Q3FY25, increased by 1.2% YoY (+12.5%QoQ). EBITDA stood at INR 130,320 Mn, down 15.0% YoY (+11.0% QoQ), underperformed our estimates, mainly due to higher-than-expected cost of goods sold. The reported EBITDA margin decreased by 239bps YoY (-9bps QoQ), reaching 11.5%. We lower our EPS estimates by 11.7%/ 8.2% for FY26E/27E respectively, primarily due to weaker-than-expected earnings in Q3FY25, demand moderation in PV and CV segments. The ongoing weakness in the Chinese market, along with potential long-term margin pressures and rising emission and warranty costs, pose further risks to profitability.

Outlook

We have rolled over our valuation to FY27E estimates, applying an EV/EBITDA multiple of 3.0x for JLR, 2.0x for the Chery-JLR JV, 12.0x for TML-PV, and 10.0x for TML-CV on FY27E EBITDA. Based on this, we revise our target price to INR 757 per share (previously INR 989), incorporating INR 36.0 for Tata Technologies (20.0% discount on holding). Subsequently, we maintain our ACCUMULATE rating on Tata Motors Ltd.