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Motilal Oswal Report
Given the significant challenges at JLR and the continued geopolitical uncertainty, Motilal Oswal has reiterated its Sell rating on the Tata Motors Passenger Vehicles Ltd. with SoTP-based target price of Rs 310 per share (based on FY28E).
The brokerage values JLR and India PV business at two times and 13x EV/Ebitda, respectively.
Tata Motors Passenger Vehicles (TMPV) adjusted PAT came in at RS 1,140 crore in Q1 FY27 compared to our estimated loss of Rs 120 crore, on the back of a better than-expected performance in JLR.
While JLR margins were better than expected, they still remained under pressure due to a sharp rise in VME cost.
Despite strong volume growth, India business margins remained largely stable YoY, which was disappointing. Even net consolidated automotive debt increased to Rs 42,200 crore from RS 30,700 crore QoQ, fully attributable to JLR.
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On account of the better-than-expected JLR performance in Q1, we raise our FY27 EPS estimate by 12%. However, given the multiple headwinds ahead, we refrain from changing our FY28 estimates materially at this stage.
While India business has been gaining market share, margins remain under pressure given the adverse mix and rising input costs. Further, JLR continues to face multiple headwinds, both on the demand and cost fronts. While JLR has embarked on a major cost-reduction initiative, it is likely to only help partially offset the current headwinds.
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