Tata Motors Has CLSA, Morgan Stanley, Other Brokerages Positive Despite Weak JLR Guidance — Here's Why
Despite the negative outlook for the next year for the JLR business, brokerages expect the company to see revival in the medium term.
Tata Motors Ltd. stock has been in focus after the company held its investor day for Jaguar Land Rover on Monday. The company expects revenue of its UK subsidiary to decline by a billion pounds and its margins to contract 300 basis points in FY26.
However, despite the negative outlook for the next year for the JLR business, brokerages expect the company to see revival in the medium term, led by cost savings and the US-UK Free Trade Agreement among other factors.
FY26 Revenue, EBIT Guidance Cut
Tata Motors expects JLR revenue to decrease from £29 billion in fiscal 2025 to £28 billion in the current fiscal, with EBIT margin contracting from 8.5% in FY25 to 5–7% in FY26E.
Lower margin and higher working capital needs shall drag free cash flow from £1.5 billion in fiscal 2025 to close to zero in this financial year.
Despite these key measures, Morgan Stanley maintained its ‘equal-weight’ rating on Tata Motors, with a target price of Rs 715.
While the key announcements led them to cut profit estimates by 8%, the brokerage feels that unlike past downcycles, this time JLR is much stronger on all fronts.
The company's earnings recovery might be gradual, with the launch of the Electric Range Rover in 2026, according to Morgan Stanley. The average selling price for its vehicles will continue to inch up, boosting margins. Between FY21-25, the company’s average selling price has risen 26%.
CLSA maintained its 'outperform' rating with a target price of Rs 805 per share. Despite an uncertain environment, JLR continued to maintain its investment guidance of 3.8 billion pounds, it noted.
In an earlier note, CLSA had said it expects Tata Motors’ demerger in second half of fiscal 2026 to unlock value, as the CV cycle recovery from FY27 should be valued instead of being hidden under the near term risks for JLR.
While Emkay has also cut profit estimate by 15% for FY26-27, it sees that JLR has significantly strengthened its business profile led by largely resilient volume and high profitability.
It also sees the company’s balance sheet strength being net cash positive and thus positioning itself well to withstand near-term challenges. Emkay has a target price of Rs 750 per share for Tata Motors, signifying an upside of 10% from current market price.
But Jefferies has largely maintained a dovish stance, keeping its 'underperform' rating on Tata Motors and cutting the target price to Rs 600 from Rs 630 per share. While the brokerage recognises Tata's focus on improving franchise across India and JLR, it remains concerned about multiple headwinds across businesses.
Going Forward: Multiple Key Monitorable
There are a few things to keep note of for investors. The first aspect will be the demerger of the trucks and cars business of the company. The appointed date is July 1, 2025 and the eventual listing of the commercial vehicle division is expected to happen by end of 2025.
The other key thing is relaunch of the Jaguar brand as an all-electric brand and how the market accepts it. Another monitorable will also be revival of growth in domestic market for cars led by multiple new launches.
