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Tata Motors, the Indian multinational automotive manufacturer, experienced a 3% surge in its share price despite reporting an 11% decline in its Q2 profit. While the company's Q2 performance was hampered by weak margins at Jaguar Land Rover (JLR), analysts remain optimistic about the second half of FY25, predicting an improvement in performance as JLR's margin challenges subside. Despite a challenging external environment, Tata Motors remains focused on driving growth, competitiveness, and free cash flows. The company's revenue for the quarter fell by 3.5% year-on-year to Rs 101,450 crore, with EBITDA margin dipping by 230 bps to 11.4%.
The decline in JLR's revenue by 5.6% to £6.5 billion during the quarter was attributed to temporary supply constraints, which led to a 220 bps fall in EBIT margins to 5.1%. However, Tata Motors anticipates a sharp improvement in JLR wholesales as supply challenges ease. While commercial vehicle revenues dipped by 13.9%, EBITDA margins rose to 10.8%, boosted by favorable pricing and material cost savings. Passenger vehicle revenues also declined by 3.9%, but EBITDA margins remained steady at 6.2%. Tata Motors anticipates a positive impact from the festive season and investments in infrastructure, leading to a broader improvement in performance in the second half of FY25. The company also aims to achieve a net debt-free status by the end of the year.
Despite the recent dip in Tata Motors' share price, which is down 32% from its peak, CLSA has upgraded the stock to 'outperform' with a target price of Rs 968. However, other analysts have slashed their price targets on Tata Motors by as much as 30% due to concerns about JLR. Nomura maintained a 'buy' rating with a revised target price of Rs 900, while Jefferies retained its 'buy' rating but lowered its target price to Rs 1,000. UBS, however, maintained a 'sell' recommendation with a target price of Rs 780, expressing concerns about the quality of JLR's EBIT and the company's margin guidance, which is contingent on demand not worsening further.
Source: Tata Motors Rises 3% Despite 11% Fall In Q2 Profit; Check Latest Target Price