Tata Motors has witnessed a remarkable surge in its share price, reaching a new 52-week high, following the release of robust Q3 results. The auto giant reported a consolidated net profit of ₹7,025 crore, marking an impressive 137.5% growth compared to the same period in the previous year. This substantial growth can be attributed to strong demand for both passenger and commercial vehicles, along with strategic price hikes and an enhanced product mix.
In the third quarter of FY24, Tata Motors’ revenue experienced a noteworthy increase of 24.9%, reaching ₹110,577 crore compared to ₹88,489 crore in the corresponding period a year ago. The British luxury car unit, Jaguar Land Rover (JLR), played a significant role in this surge, contributing ₹76,665 crore to the overall revenue, a substantial increase from ₹58,863 crore in the previous year.
The company’s operating performance also witnessed improvement, with EBITDA increasing by 42.5% year-on-year to ₹15,333 crore, and the EBITDA margin expanding by 171 basis points to 13.94% during the December quarter. Global brokerage firm Jefferies expressed optimism by raising FY24-26 EPS estimates for Tata Motors by 7-11%, giving the stock a ‘Buy’ rating with an increased target price of ₹1,100 per share.
Nomura echoed positive sentiments, highlighting JLR’s margin performance in Q3 and anticipating further re-rating, particularly driven by the success of electric vehicles (EVs). Tata Motors’ consolidated EBITDA slightly fell short of Kotak Institutional Equities’ estimates, but the domestic brokerage firm expects a healthy performance in FY2024-26E, fueled by improvement in JLR business, market share gains, and a net cash balance sheet by FY2025E.
Kotak Equities upgraded Tata Motors stock to ‘Add’ from ‘Reduce,’ raising the target to ₹950 per share, while the stock has witnessed significant growth, rallying over 11% in the last month and more than 44% in the past three months. As of the latest update, Tata Motors shares were trading 6.88% higher at ₹939.25 apiece on the BSE.
The company’s margin beat analyst estimates in Q3, breaking a trend of three successive quarters of decline in average selling prices. Analysts foresee a potential moderation in demand for passenger and commercial vehicles in FY25, but overall, the outlook remains positive, driven by improving margin trajectory, anticipated success in EVs, and a rapid deleveraging process.
Tata Motors’ current valuation, trading at 5 times FY26 EBITDA, is considered attractive by Nomura India, with expectations of a high free cash flow yield of 12% in FY25. The brokerage firm estimates a transformation from net debt in Q3 to net cash by FY26.
Several financial institutions, including YES Securities, Motilal Oswal, JM Financial, and Prabhudas Lilladher, have expressed favourable views on Tata Motors. YES Securities highlighted the company’s improving India franchise, early leadership in Indian EVs, and JLR’s enhanced profitability. Motilal Oswal anticipates a healthy recovery driven by JLR, while JM Financial expects strong free cash flow generation and a reduction in net debt.
