Tata Motors' UK arm Jaguar Land Rover (JLR) has come out with its annual report for FY24 and the key takeaways included a 430 basis points year-on-year (YoY) improvement in Ebitda margins, driven by a richer product mix and operating leverage benefits. Kotak Institutional Equities said there was also an improvement in the performance of the China JV despite lower volumes, led by cost-control measures. The auto major remains well-capitalised, with debt securities well spread out; and that its pension plan remains overfunded.
Kotak said it expects Tata Motors' FY2025-26E performance to remain healthy, led by steady JLR business performance, driven by an improvement in mix and cost-control measures, market share gains in the PV and CV segments and a net cash balance sheet by FY2025E. "Tata Motors continued to focus on improving SUV segment product mix, with Range Rover and Defender, which contributed 79 per cent of the total sales in FY2024 (from 76% in FY2023). In addition, JLR is repositioning itself with a house of brands strategy by creating four separate brands: Range Rover, Defender, Discovery and Jaguar. The company intends to launch more premium ICE and electric SUVS under the new strategy to further improve the SUV product portfolio," it said.
On the other hand, the China JV’s reported Ebitda margin expansion of 100 bps on a YoY basis to 14 per cent due to cost-control measures. Net derivative financial liability declined to negative 61 million British pounds in FY2024 from positive 761 million British pounds in FY2023.
"The current portion of derivative financial liability was 4,265 million pounds, implying that if the spot rate does not change, the hedge book loss should be around these levels. The defined benefit obligation related to the pension payments of employees remained flat at 5.1 billion pounds, and the pension plan remained overfunded at 278 million pounds in FY2024. Net worth increased to 5.6 billion pounds in FY24 from 2.6 billion pounds, mainly driven by strong operating performance," it said.
The brokerage maintained its consolidated EPS estimates for FY2025-27. It maintained an 'Add' rating on the Tata Motors stock with an unchanged fair value of Rs1,100, based on SoTP methodology.