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Yes Securities Report
Tata Motors Ltd.'s Q2 FY24 consolidated results were in-line to our/street estimates with underlying profitability continues to be robust across businesses. This reflected in consolidated Ebitda growth of 1.2 times YoY (+1% QoQ) with margins at-
Jaguar Land Rover at 14.9% (+490 basis points YoY/ -140 bp QoQ, estimate 15%),
Domestic commercial vehicle at 10.4% (+540 bp YoY/ +100 bp QoQ),
Domestic PV at 6.5% (+110 bp YoY/ +120 bp QoQ).
There were several line items which were positive such as-
Net Auto debt decline further to ~Rs 387 billion in Q2 (versus Rs 417 billion in Q1 and Rs 437 billion in FY23),
margins for ICE PV at 9.2% (versus 8.6%/8.5% in Q1/FY23) with guidance of double digit Ebitda intact,
upward revision in JLR Ebit guidance to ~8% for FY24E (versus 6% earlier with no change to FY26 Ebit margins guidance of double digit and
JLR's H2 FY24 volumes guidance to be better than Q2 FY24.
The menorandum of understanding between JLR and Tata Passenger Electric Mobility Ltd. for access to the JLR's electrified modular architecture platform is a step that would offer cross synergies including entry into mid SUVs (Avinya).
We like Tata Motors given it's improving India franchise, early leadership in EVs in India, and JLR's improved profitability.
Standalone business is in mid-upcycle led by cyclical recovery both in PV and CV whereas favorable product cycle to help drive JLR outperformance.
We raised FY24/25 consolidated earnings per share by 3-4% to factor in for better margins at JLR.
We estimate revenue/Ebitda compound annual growth rate of 8%/17% in FY23-26E and maintain 'Buy' with SoTP based target price of Rs 773 (versus Rs 768 earlier).
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