Tata Motors Q3 Results Review - Strong Margin Performance To Continue: Prabhudas Lilladher

Prabhudas Lilladher Report

Tata Motors Ltd.’s consolidated revenue was largely in-line with our and consensus estimates, however, Ebitda margin at 13.9% beat our estimate and Bloomberg easily. Jaguar Land Rover sees Q4 performance to be strong on seasonality basis and has guided for Ebit of more than 8% in FY24. Its average selling price decline paused in Q3, after falling for three successive quarters, due to better mix.

Conversely, benefits from volume ramp-up aided by good order book and rich mix of higher ASP models within that should support ASP and margins at higher levels. Lower commercial vehicle discounts helped margins in Q3; we see CV margins continuing to expand in Q4.

Tata Motors noted slowed demand for PV and CV in FY25 on high base and general election period among other factors. We maintain our positive stance on the company given-

1. JLR’s volume ramp-up resulting in strong revenue, profitability and free cash flow,

2. India CV benefitting from underlying economic strength, benign input costs and lower discounts and

3. focus on market share in PV segment (14.6% in Q3 FY24 versus 8% in FY21) led by model launches and rising EV penetration.

We increase our FY24/25/26E Ebitda estimates by 2%-6%, to factor in Tatat Motors’ Q3 FY24 margin and PAT performance. Retain ‘Buy’ with SoTP based target price of Rs 1,010 (earlier Rs 900).

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