Latest Market Updates : Better mix prevented the average selling price reduction that had been occurring for three quarters in a row for Tata Motors Ltd., as the company’s Q3 margin exceeded analyst projections by a comfortable margin. Seasonally speaking, JLR’s figures were excellent, and comments about demand have remained encouraging. Analysts generally remained optimistic about Tata Motors because to its increasing margin trajectory, likelihood of success with EVs, and rapid deleveraging, even if the company may experience some deceleration in demand for passenger and commercial cars in FY25 on a high base.
With a probable high free cash flow (FCF) yield of 12% in FY25, Nomura India finds the trade price of Tata Motors, which is five times FY26 Ebitda, to be appealing. It projects that Tata Motors will have net cash of Rs 10 per share in FY25 and Rs 74 per share in FY26, up from net debt of Rs 29,200 crore (or Rs 79 per share) in Q3. “Further re-rating of JLR will depend on the success of its new EV models,” it stated.
According to Motilal Oswal, Tata Motors should see a robust comeback as JLR’s supply-side problems go away and the challenges related to commodities for the India company level out. JLR will spearhead the following phase of growth, it stated. The local brokerage projects that, in keeping with management’s estimate, EBIT margin would reach 9.9% by FY26.
“The focus shifts to margin expansion-led earnings growth, which is likely to sustain,” it stated, putting out a target of Rs 1,000. “While the India CV and PV businesses would see some moderation in growth in FY25E,” it said.
Analysts stated that the Tata Motors management thinks that JLR’s order book will be driven by increased marketing expenditures. By FY26, 10% EBIT margin is the target to be attained through improved mix and increased operating leverage.
“Considering Tata Motors’ growing India franchise, early market leadership in EVs in India, and JLR’s increased profitability, we favor the company. The standalone business is currently experiencing a mid-cycle in both PV and CV, whereas JLR is outperforming due to a favorable product cycle. In order to account for improved margins at JLR and quick deleveraging, we reduced FY25E consolidated EPS by 10% as we reduced CV volumes for the domestic company and raised FY26 consolidated EPS by 9%,” YES Securities stated, recommending a target price of Rs 1,060 for the shares.
Strong free cash flow (FCF) generation is anticipated to underpin JLR’s electrification initiatives, according to JM Financial, and the business is on target to reduce net debt to £1 billion by the end of FY24 and earn a profit by FY25.
“In the domestic EV market, Tata Motor’s EV portfolio is leading. In the near future, CV demand is anticipated to remain low. Nonetheless, rising margins for the domestic PV and CV industries are encouraging for profitability as a whole. The domestic business is also on track to become net debt free,” it stated, with a stock price target of Rs 1,000.
According to Prabhudas Lilladher, Tata Motors benefited from a strong order book, a rich variety of higher ASP vehicles, and a production ramp-up. The third quarter had higher profitability due to lower CV discounts. The brokerage values the shares of Tata Motors at Rs 1,010.
Disclaimer : The above article is meant for informational purposes only, and should not be considered as any investment advice.