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Motilal Oswal Report
Tata Motors Ltd. reported a weak consolidated performance in Q2 FY25, with margins contracting ~150 bp YoY to 11.6% (estimate: 13.2%). This was mainly due to weaker volumes and high cost pressures for Jaguar LandRover, while India business remained resilient despite weak demand.
While management has maintained its guidance for JLR despite several headwinds, we believe margin pressure is likely to persist for JLR over FY24- 27E, given weak demand, rising discounts and normalizing mix.
Even in India, both commercial vehicle and PV businesses are seeing moderation in demand. We have lowered our Ebitda estimates for Tata Motors by 3%/7% for FY25/FY26 to factor in weakness in JLR business. The stock trades at 15 times FY25E/FY26E consolidated earnings per share and 6.5x/5.5x EV/Ebitda. Reiterate Neutral with Sep'26E SOTP-based target price of Rs 840.
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