Tata Motors Q1 Results Review: JLR Production Ramp-Up Will Continue To Boost Earnings

Tata Motors Ltd.'s U.K-based subsidiary Jaguar Land Rover's plan to ramp up production of key models in the second half of the ongoing fiscal may boost the company's earnings, analysts said.

The turnaround of the British luxury carmaker on the back of easing chip shortage ensured a third consecutive quarter of net profit for Tata Motors in the three months ended June.

The company's consolidated net profit stood at Rs 3,203 crore against a net loss of Rs 5,007 crore a year earlier. That compares with the Rs 2,552 crore consensus estimate of analysts tracked by Bloomberg.

• Revenue rose 42% to Rs 1,02,236 crore. (Bloomberg estimate: Rs 1,01,290 crore)

• Ebitda rose 448% to Rs 13,218 crore. (Bloomberg estimate: Rs 11,965 crore)

• Ebtida margin stood at 12.9% versus 3.4% last year. (Bloomberg estimate: 11.8%)

JLR expects to sustain the recent improvement in its performance and highlighted upside risk to its FY24 margin guidance in a call to discuss June quarter results with investors.

It is raising capacity for Range Rover and Range Rover Sport by 30% in the second half of the ongoing fiscal, which should further boost product mix and can offset the potentially higher discounts going ahead, Jefferies said in a report.

The company has guided for 4 lakh wholesales and 6% Ebit margin in FY24. Range Rover, Range Rover Sport and Defender models make up 76% of the its orderbook of 1.85 lakh by end of June.

In the quarter ended June, JLR’s revenue rose 57% year-on-year to £6.9 billion, with a strong 960 basis point expansion in the operating margin to 16.3%.

The higher profitability year-on-year reflects favourable volume mix, pricing, and foreign exchange revaluation, offset partially by higher inflation and supplier claims, the company said.

Here's what brokerages made of Tata Motors' Q1 performance:

• Maintains ‘Buy’ with the target price raised from Rs 700 to Rs 800, with a potential upside of 25%.

• JLR in strong cycle, raising RR & RR Sport capacity by 30% in the second half to boost product mix

• Commercial vehicle margins performed well but passenger vehicle margins were down due to weak EV profitability

• Launch of a new mid-sized SUV in 2024 and EV expansion in H2 should boost franchise.

• Upgrade FY24-26 earnings per share estimate by 6-8%.

• Maintains overweight rating with target price Rs 711, indicating a potential profit of over 11%.

• Reported Q1 EPS of Rs 12.7, higher than expectation of Rs 7.

• JLR earnings are rebounding from a low base, and should drive deleveraging in FY24.

• India EV ramp to be the key theme in fiscal 2024.

• Reiterate 'buy' with target price of Rs 750, implying an upside of 17%.

• Healthy recovery on cards as supply-side issues ease for JLR with a better mix, lower discounts and improved operating leverage.

• Company will benefit from uptrend in CVs, stable growth in PVs.

• Sharp improvement in free cash flow as well as reduction in net debt expect at both JLR and India business.

• Maintains 'buy' with target price of Rs 712, a potential upside of 11%.

• Better product mix (Range Rover/Range Rover Sport/Defender) and limited edition models should help aid margins.

• Demand for CVs expected to remain strong on the government's infrastructure push and favourable macro conditions.

• PV continues to do well and should recover margins as EV costing improves.