Hold Tata Motors target of Rs 847 Prabhudas Lilladher

Prabhudas Lilladher's research report on Tata Motors

TTMT’s consolidated revenue for Q2FY25 declined by 3.5% YoY, missing consensus/PL estimates by 2%/6%. The de-growth in revenue was attributable to decline of 15.4%/5.9%/9.8% in its CV, PV and JLR volume respectively. Consequently, de-growth in volume coupled with production impact in its JLR business led its EBITDA to decline by 15% YoY while margin contracted by 155bps YoY to 11.5%. Weak overall performance dragged in PAT lower by 11% YoY. Despite weak operational performance specifically in the JLR business, the management remains optimistic on delivering EBIT margin of ≥8.5% EBIT and 10% in FY26. In terms of CV and PV business, near term challenges shall impact its volume growth, however, remains optimistic on long term growth outlook to drive growth. As Q2FY25 performance was weaker than anticipated, we cut our estimates by 7-11% to factor-in the impact of slowdown across business verticals. With key market like China & Europe being under pressure from competitive pressure and demand slowdown respectively, we expect JLR to deliver modest growth in its volume.

Outlook

Additionally, increased competitive intensity and slowdown in EV traction shall impact their PV business. CV business could benefit from demand revival in H2FY25 and CV upcycle from FY26. Based on this we change our rating from “Accumulate” to “Hold” with SoTP-based target price of Rs847 (previous Rs1,172).

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