Tata Motors’ stock witnessed a 4.7 percent rise to reach Rs 666 per share in early trading on November 3, driven by the positive reception of its return to profitability in the second quarter by brokerage firms.
The company’s return to profitability was largely attributed to increased volumes in the domestic market, decreasing commodity prices, a volume increase at its luxury car subsidiary, Jaguar Land Rover (JLR), and improved operating leverage.
For the July-September quarter, Tata Motors reported a consolidated net profit of Rs 3,764 crore, a significant improvement from the consolidated net loss of Rs 945 crore in the same quarter last year. Tata Motors’ net revenue also surged to Rs 105,128 crore. These results exceeded analyst expectations, as the average estimate of five brokerage firms had projected that the company’s revenue from operations would increase by 28 percent to Rs 1,01,155 crore.
Global brokerage firm Jefferies has expressed confidence that Tata Motors’ luxury car unit, Jaguar Land Rover, is poised for an even stronger second half, driven by increased volumes and higher Range Rover (RR) and RR Sport capacity. Jefferies issued a buy recommendation for the stock with a target price of Rs 800, implying a potential upside of nearly 28 percent. JLR has also raised its FY24 EBIT margin guidance to 8 percent from 6 percent.
Morgan Stanley analysts maintain a bullish outlook, giving Tata Motors an overweight recommendation. They believe the company has successfully reduced its debt and minimized losses in the Indian EV space. Their target price for the stock is Rs 711, representing a 14 percent increase from the closing price on November 2.
CLSA analysts also recommend buying shares of the Nexon maker, highlighting increased production levels for JLR in the second half, anticipated market share gains in the domestic passenger vehicle business in FY25, and the maintenance of a double-digit EBITDA margin in the domestic commercial vehicle space.
Motilal Oswal notes that Tata Motors is likely to experience a healthy recovery as supply-side issues for JLR ease and commodity headwinds for the Indian business stabilize. The firm is optimistic about the commercial vehicle uptrend, stable growth in passenger vehicles, a significant improvement in free cash flow, and a reduction in net debt for both JLR and India businesses.
Tata Motors’ Group Chief Financial Officer, P.B. Balaji, expressed confidence in sustaining the company’s positive momentum, stating, “It is pleasing to see all the businesses deliver on their well-differentiated plans this quarter. With a strong product pipeline, a seasonally stronger H2, and continued focus on cash accretive growth, we are confident of sustaining this momentum.”
Over the last six months, Tata Motors’ stock has delivered a return of 36 percent.
