Motilal Oswal's research report on Tata Motors
We attended Tata Motors’ (TTMT) virtual analyst meet for its JLR business. JLR continues to face several headwinds, such as tariff wars and resultant USD depreciation vs. GBP, uncertainty over EV transition, challenging market conditions in China, and rising warranty costs. As a result, management has lowered its EBIT margin guidance for FY26 to 5-7% from 10% earlier. It has also reduced its FCF guidance to nil from GBP1.8b earlier. TTMT has also indicated that it is working hard to improve efficiencies across the firm, with specific enterprise missions to drive the firm’s transformation amid headwinds. These initiatives could result in cost savings of GBP1.4b p.a. during 2HFY26 to FY27-28 and help TTMT to return to its earlier EBIT margin target of 10% over time. While our estimates were already lower than the consensus, we have reduced our FY26 EBIT margin assumption for JLR to 6% (earlier 6.9%), which has led to a 10% cut in our FY26 earnings estimates.
Outlook
We have maintained our FY27 estimates at this stage. Given the multiple headwinds highlighted above, we reiterate Neutral with FY27E SOTP-based TP of INR690.
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