Tata Motors shares: Will JLR sales drag Tata group stock lower? Here are target prices

The UK arm of Tata Motors Ltd, Jaguar Land Rover (JLR), clocked a 3 per cent drop in sales in Q2, while it reported a 10 per cent fall in wholesales amid issues at a key aluminum vendor. JLR said retails were higher in North America (up 9 per cent YoY) and UK (up 29 per cent YoY), but lower in Europe (down 22 per cent YoY), China (down 17 per cent YoY), and overseas (down 6 per cent YoY).

It is expecting production and wholesales to grow strongly in the second half of FY25 amid supply normalisation. Analysts said the JLR commentary around volume rebound is encouraging but divergent from luxury peers, who have recently downgraded their outlooks, citing demand weakness in China.

Emkay Global has reaffirmed its positive outlook on the stock, given the structural improvements across operational parameters at JLR -- it is on track for becoming net-debt free in FY25E. The brokerage is positive on Tata Motors' healthy India outlook, particularly in CVs, amid impending cyclical recovery and strong margin uptick.

"Tata Motors' balance sheet is healthy with least-demanding valuations among OEMs. We cut FY26E/27E EPS by 2 per cent (5 per cent/10 per cent revenue/PBT CAGR) on slight margin reduction, and reiterate BUY with unchanged target price of Rs 1,175 per share," Emkay Global said.

MOFSL expects JLR's margins to remain under pressure over FY24-FY26, given the rising cost pressure as it invests in demand generation; normalizing mix; and EV ramp-up, which is likely to be margin-dilutive.

Even in the Indian business, both CV and PV businesses are experiencing moderation in demand, it noted adding that it is factoring in flat margins for the Indian business over its forecast period.

"While there is no doubt that Tata Motors delivered an extremely robust performance across its key segments in FY24, the above mentioned headwinds could hurt its performance going forward. The stock trades at 16 times/13 times FY25E/FY26E consolidated EPS and 6 times/5 times EV/Ebitda. We reiterate Neutral with our June’26E SOTP-based target price of Rs 990," it said.