Citi has cut its target price on Tata Motors PV for the third time in three months after the automaker's June-quarter results came in well below the brokerage's estimates, with margin pressures across both India and JLR businesses remaining a key concern. Citi retained its Sell rating and lowered the target to Rs 305 from Rs 320, while Macquarie maintained Outperform with a Rs 381 target, citing healthy domestic demand despite margin risks.
Citi's latest target cut follows reductions in May and June. The brokerage first lowered its target from Rs 345 to Rs 330 in May, then to Rs 320 in June, and has now cut it further to Rs 305 in August. Its latest note flagged continued commodity-cost inflation and said Q2 margin is also expected to be in line with Q1.
Macquarie was more constructive, maintaining its Outperform rating and Rs 381 target. It said margins disappointed, creating near-term risks, but remained upbeat on domestic growth. It also said JLR was in line with muted expectations.
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Tata Motors PV Q1 Highlights (Consolidated, YoY)
- Revenue rose 9.3% to Rs 95,799 crore from Rs 87,677 crore.
- EBITDA fell 17.2% to Rs 6,326 crore from Rs 7,639 crore.
- EBITDA margin stood at 6.6% versus 8.7%.
- Net profit fell 80.3% to Rs 775 crore from Rs 3,924 crore.
- JLR revenue fell 9.6% YoY to £6 billion.
- JLR EBITDA margin stood at 8.1% in Q1.
- JLR EBIT margin stood at 2.8% versus 4% a year earlier.
- EV volumes grew 112% YoY.
JLR volumes were impacted by supply constraints, while revenue growth was diluted by adverse foreign exchange and commodity movements. Profitability was also impacted by market conditions, although JLR remained profitable despite supply disruptions.
Domestic demand remained healthy despite cost pressures. Tata Motors PV expects commodity costs to remain elevated and is focused on revenue growth and cost reduction.
JLR plans to launch four new battery electric vehicles in the coming months. Geopolitical developments and luxury-segment trends remain key monitorables.
ALSO READ: Tata Motors PV Signals More Price Hikes As Commodity Costs Rise Further
Here's what brokerages are saying after Tata Motors PV announced Q1 results:
Citi
- Maintained 'Sell'; Target Price Cut To Rs 305 From Rs 320
- Said Q1 results were much below estimates.
- Flagged margin headwinds across both businesses.
- Said management's outlook for India remains positive, given healthy underlying demand.
- Expects Q2 margin to be in line with Q1 because of continued increases in commodity costs.
- Cut its target price to Rs 305 from Rs 320, its third target reduction in three months.
- Citi had previously cut its target from Rs 345 to Rs 330 in May and then to Rs 320 in June.
Macquarie
- Maintained 'Outperform'; Target Price At Rs 381
- Said margins disappointed, with near-term risks persisting.
- Said India margins disappointed.
- Viewed JLR as in line with muted expectations.
- Remains upbeat on domestic growth.
- Flagged margin risk as a key concern.
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