Tata Motors shares tank 9% after Q4 results; check revised target prices on Tata Group stock

Shares of Tata Motors Ltd cracked during the trading session on Monday after the company reported a mixed set of numbers for the March 2024 quarter. The knee-jerk reaction was seen as the auto major missed the Q4 estimates followed by a weak guidance for Jaguar Land Rover (JLR).

The Tata Group's automaker posted a staggering 222 per cent year-on-year (YoY) jump in the consolidated net profit at Rs 17,407 crore, thanks to improved operating leverage, favourable commodity prices, and strong volume growth across various segments. Its revenue from operations increased 13 per cent to Rs 1.2 lakh crore.

Tata Motors' numbers might appear impressive on the face of it but its Q4 results missed Street estimates on revenue and Ebitda fronts. Market participants believe that the best may be behind for all Tata Motors businesses and one should expect a moderate growth in FY25 due to a high base. It stayed cautiously optimistic, with H1 expected to be weaker amid demand concerns.

After the Q4 results, shares of Tata Motors plunged more than 9.22 per cent to Rs 950.30 on Monday, commanding a total market capitalization of more than 3.15 lakh crore for the day. The scrip had settled at Rs 1046.85 in the previous trading session on Friday. The stock has rallied more than 100 per cent from its 52-week lows.

Tata Motors’ consolidated Ebitda was below estimates, driven by weak domestic CV business performance. The JLR and domestic PV businesses’ Ebitda were broadly in line with our expectations, said Kotak Institutional Equities. It generated FCF of Rs 26,900 crore in FY24, resulting in sharp reduction in consolidated net debt and remains on track to become net cash by FY25E, it said.

"Overall, we expect the FY2025-26E performance to remain healthy, led by steady JLR business performance, driven by an improvement in mix and cost control measures, market share gain in the PV and CV segments and net cash balance sheet by FY25E," it added with an 'add' rating with a fair value of Rs 1,100.

Tata Motors Q4FY24 results were operationally in line with estimates as Ebitda margin expanded 30bp QoQ to 14.2 per cent. While there is no doubt that Tata Motors has delivered an extremely robust performance across its key segments in FY24, there are clear headwinds ahead that are likely to hurt its performance, said Motilal Oswal Financial Services.

"We had recently downgraded to 'neutral' on the back of JLR margins are unlikely to improve given anticipated rising cost pressures and normalizing mix, and a weak outlook for India business. These factors are now playing out in line with our expectation., it added with a revised target price of Rs 970 on the stock," with the same rating.

Q4FY24 revenue and Ebitda grew 13 per cent and 33 per cent YoY, respectively slightly missing estimates due to lower-than expected numbers in India CV and PV divisions. JLR order book reduced from 1,48,000 units in December 2023 to 1,33,000 units in March 2024, said Nuvama Institutional Equities.

"Order book exhaustion and a high base should lead to single-digit growth in FY25E. Besides, a muted showing in India CV is likely due to loss of share to railways (DFC), slowdown in infra spend and high base. We are building in a moderate revenue and Ebitda CAGR of 8 per cent and 13 per cent, respectively," it added with a 'reduce' rating with a target price of Rs 940.

Management indicated higher marketing spends going forward to drive JLR’s order book. FY25 Ebit margin is expected to be flattish. Strong FCF generation is expected to support investments towards electrification at JLR and the company is on track to turn to net cash by FY25, said a note by JM Financial.

"In the domestic PV segment, new launches are expected to drive growth. Domestic CV demand is also expected to pick-up from 2Q. Improving margins for both domestic CV and PV segments augurs well and net cash position in India auto business provides comfort," said JM with a 'buy' rating with a target price of Rs 1,200. "Slowdown in key global markets remains a monitorable."

Among the global brokerage firms, Nomura downgraded the stock to 'neutral' from 'buy' but increased target price of Rs 1,141 as it said that the stock is in fair value zone after a steady performance. "JRL may face demand risks, while PVs business will grow ahead of the industry with moderation in the commercial vehicle industry," Nomura said.

JPMorgan is bullish on the stock with an 'overweight' rating, raising the target price to Rs 1,115, while Jefferies issued a 'buy' call with a raised target price of Rs 1,250 per share. However, Morgan Stanley has downgraded the stock to equal-weight with a target price of Rs 1,100.