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Prabhudas Lilladher Report
We increase our FY24/25/26E Ebitda estimates of Tata Motors Ltd. by 7%/4%/4%, to factor in company's updated margin guidance and Q2 performance.
Tata Motors' consolidated revenue was below our and consensus estimates (by ~3%), led by lower realisation across Jaguar Land Rover, commercial vehicle and passenger vehicle segments. However, margin beat at CV and PV helped report in line absolute Ebitda.
JLR has increased its FY24 Ebit margin guidance from more than 6% to ~8% (higher than expected). JLR's average selling price have declined QoQ for the third successive quarter due to poor mix, we see this trend normalizing now.
Benefits from volume ramp up helped by a strong order book of 168,000 units (with more than 77% mix of higher ASP models) should support the ASP and margins at higher levels. Lower discounts at CV helped margins in 2Q; we see CV margins continuing to expand.
Tata Motors sees H2 to be better than H1 for PVs and EVs to see fast ramp-up going ahead.
We maintain our positive stance on Tata Motors given-
JLR's volume ramp-up resulting in strong revenue, profitability and free cash flow,
Domestic CV benefitting from underlying economic strength, operating leverage, benign input costs and lower discounts and
focus on market share in PV segment (13.4% in H1 FY24 versus 8% in FY21) led by model launches and rising EV penetration.
Retain ‘Buy' with SoTP based target price of Rs 785 (earlier Rs 760).
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