Tata Motors Q3 Results Review - Healthy JLR Performance To Cushion Weak Standalone: Yes Securities

Yes Securities Report

Tata Motors Lts Q3 FY24 consolidated results were operationally in-line to our estimates while it exceeded street estimates with Ebitda beat of ~10.9% at Rs 153.3 billion (plus 59% YoY/ plus 11.7% QoQ).

However, higher other income and lower tax (at Jaguar Land Rover) boosted adjusted profit after tax at Rs 73.6 billion (versus our/street of Rs 44.4 billion/Rs 47.1 billion). With healthy underlying profitability, the margins came-in health with consol Ebitdam at 13.9% (plus 300 basis points YoY/ plus 80 bp QoQ). There were several line items which were positive such as-

1. Net auto debt decline further to ~Rs 292 billion (versus ~Rs 387 billion in Q2 and Rs 437 billion in FY23) led by healthy free cash flow both at JLR/domestic business,

2. margins for ICE private vehicle at 9.4% (versus 9.2%/8.5% in Q2/FY23) with guidance of double digit Ebitda intact,

3. upward revision in JLR Ebit guidance to greater then 8% for FY24E (versus ~8%/6% in Q2/Q1 with no change to FY26 Ebit margins guidance of double digit.

While JLR demand commentaries continue to be positive for North America and stable for Europe, there would be some disruptions led by red sea impact.

We like Tata Motors given it’s improving India franchise, early leadership in electric vehicle in India, and JLR’s improved profitability. Standalone business is in mid-upcycle both in private vehicle and commercial vehicle whereas favorable product cycle to help drive JLR outperformance.

We cut FY25E consolidated earning per share by ~10% as we cut commercial vehicle volumes for the domestic business while raise FY26 consolidated earning per share by ~9% to factor in for better margins at JLR and fast deleveraging.

We estimate revenue/Ebitda/Adjusted profit after tax compound annual growth rate of 10%/12%/27% in FY24-26E and maintain 'Buy' with SoTP based target price of Rs 1,060 (versus Rs789 earlier).

We raise JLR multiple to three times (versus two times earlier) to factor in for healthy profitability.

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