Tata Motors Q2 Results Review: Strong Cycle At JLR To Underpin Growth In Coming Quarters

Tata Motors Ltd.’s UK-based subsidiary Jaguar Land Rover's plans to ramp up production in the second half of the ongoing fiscal and a strong orderbook will support the Indian automaker’s growth in the coming quarters, analysts said.

The company reported profit for the fourth consecutive quarter in the three-month period ended September but missed analyst estimates.

The automaker's consolidated net profit stood at Rs 3,764 crore, against a net loss of Rs 944.6 crore in the same quarter last year, according to an exchange filing on Thursday. That compares with the Rs 4,520 crore consensus estimate of profit by Bloomberg-tracked analysts.

• Revenue rose 32% to Rs 1,05,128 crore (Bloomberg estimate: Rs 1,08,110 crore).

• Ebitda increased 147% to Rs 13,767 crore (Bloomberg estimate: Rs 13,766 crore).

• Ebitda margin stood at 13.1% versus 6.99% (Bloomberg estimate: 12.7%).

The Nexon-maker expects sequentially higher production and capacity expansion of Range Rover and Range Rover Sport models in the second half of the ongoing fiscal.

The improved supply of semiconductors and robust performance in the second quarter prompted the company to raise its guidance for FY24 Ebit margin to 8% from 6% earlier.

The current order book stands at 1.68 lakh units and has gradually declined to 15,000–17,000 units in each of the last three quarters, suggesting new orders are close to 15% below retail, Jefferies said.

JLR expects the order book to dip further to nearly 1.1 lakh units by end-FY24, which would still be three times its monthly volumes, providing adequate cushion for FY25, it said.

While a few analysts raised some concerns about the demand for passenger vehicles in India, the commercial vehicle business is expected to do well in FY24.

Here’s what brokerages made of Tata Motors’ Q2 performance:

• Retains ‘buy’ with price target of Rs 800 per share, implying potential upside of 26%.

• Fine-tuned estimates factoring lower India volumes but higher margins.

• Expects FY25 Ebitda to be 2.1 times of FY23 levels and auto balance sheet to turn net cash.

• Mid-sized SUV Curvv launch in 2024 will fill a key product gap.

• Expansion of EV portfolio should boost franchise.

• Reiterates ‘buy’ with target price of Rs 750 a share, a potential profit of 18%.

• Expects healthy recovery as JLR’s supply side issues ease and commodity prices stabilise.

• The company to benefit from CV cycle and stable growth in passenger vehicles.

• Sharp improvement in free cash flows and reduction in net debt is also positive.

• Maintains ‘buy’ with target price of Rs 781, implying a potential upside of 23%.

• Expects the PVs business, both JLR and India business, to continue to be on a strong growth trajectory, led by a strong order backlog.

• India CV business to improve sequentially led by market share gain in M&HCV segment.

• Loss in EV business expected to come down in coming two quarters.

• Maintains 'buy' rating with price target of Rs 803, implying upside of nearly 27%.

• Net debt in JLR declined by £300 million, company set to turn net cash by FY25.

• Higher lithium prices impacted EV business margin.

• Company expects improvement in H2, led by lower prices, PLIs, reduced marketing costs.