Why are Tata Motors shares falling today? Price targets & more

Tata Motors reported a free cash flow (FCF) generation in a seasonally weak June quarter. Its richer product mix led to profitability at JLR despite lower volumes. The Tata group firm also reported a sharp improvement in commercial vehicle (CV) business. Its domestic passenger vehicle (PV) business, however, disappointed due to demand headwinds.

For Tata Motors' India business, with CVs set to remain flat and PVs growing in single-digits, the key driver of Ebitda growth would be improving margins in the EV business, said ICICI Securities as it downgraded the stock to 'Sell' from 'Reduce', with a revised target price of Rs 923 from Rs 915 earlier.

Globally, apart from the risks from subdued global demand and margin headwinds at JLR, a recent supplier-based constraint may pose as an incremental headwind in the near-term, analysts warned.

"This, coupled with demand moderation in its India CV and PV businesses, raises concerns about TTMT’s ability to sustain the current-level of profitability going forward," MOFSL said while suggesting a target of Rs 1,025 on the stock.

On Friday, shares of Tata Motors Ltd fell 4.76 per cent to hit a low of Rs 1,090.05 on BSE.

Tata Motors gave an EBIT margin guidance at 8.5 per cent for FY25, despite suggesting production constraints in Q2 and Q3 due to plant shutdown and floods at a key aluminum supplier.

This would be key thing to watch for, as the EBIT margin guidance largely hinges on volumes, given key margins drivers such as peak Land Rover contribution, raw material tailwinds and controlled value chain management are now moderating, YES Securities said.

The brokerage said demand challenges are cropping up in key markets like Europe and China even as the US market is still strong.

"This reflects in order book at 104,000 units in 1QFY25 (vs 1,33,000 at end of FY24, 1,50,000 in 3Q and 1,68,000 in 2Q). We raise FY25/26 consolidated EPS by 2 per cent/1 per cent to reflect upon likely muted volumes at JLR partially offset by increase in in the domestic business margins led by CV," YES Securities said while suggesting a target of Rs 1,240.

Order book exhaustion and a high base should drive growth moderation ahead, said Nuvama. "Besides, a muted showing in India CV is likely due to loss of share to railways, slowdown in infra spends and high base. Launches augur well for the PV division," it said while suggesting a target of Rs 1,010.

JM Financial said while the US and UK markets continued to be strong, demand environment in EU remains muted. The management said higher marketing spends would drive JLR’s order book ahead. 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 net cash by FY25.

"In the domestic PV segment, while demand environment remains muted, new launches (including Curvv) is expected to support growth. Domestic CV demand is also expected to pick-up going ahead. Healthy margin
performance augurs well and near net-cash position in India auto business provides comfort," it said while suggesting a target of Rs 1,200 on the stock.

Kotak Institutional Equities is positive on Tata Motors' prospects. It expects FY2025-26 performance to remain healthy led by steady JLR business driven by improvement in mix and cost-control measures, market share gain in PV and CV segments and strong FCF generation. It suggested a fair value of Rs 1,250 for Tata Motors.

On Thursday, the auto major reported a 72.43 per cent rise in net profit at Rs 5,692 crore in the June quarter against Rs 3,301 crore in the year-ago quarter. Revenue climbed 13 per cent to Rs 1.08 lakh crore against Rs 1.02 lakh crore YoY.