IGI Logo

Tata Motors, a leading automobile manufacturer in India, designs, manufactures and sells commercial vehicles (CVs) and passenger vehicles (PVs). Tata Motors acquired Jaguar Land Rover (JLR) in 2008.

* Revenue jumped 42.1% YoY to Rs. 102,236cr in Q1FY24, driven by strong growth in the luxury automotive segment. Resultantly, net profit stood at Rs. 3,090cr vs. net loss of Rs. 4,987cr in Q1FY23.

* EBITDA margin expanded 890bps YoY to 13.4% on account of improved product mix and efficient operating leverage.

* Tata Motors reported strong profitability, driven by robust demand for luxury cars and continued growth in the CV and PV segments. Production has increased as supply constraints have eased. JLR's robust order backlog, rising demand, awareness of electric vehicles (EVs), and favourable industry trends bode well for Tata Motors. Hence, we upgrade our rating to BUY on the stock with a revised target price of Rs. 736 based on SOTP valuation.

Luxury arm to drive topline growth

The company’s consolidated revenue grew 42.1% YoY to Rs. 102,236cr in Q1FY24, driven by strong growth in JLR coupled with improvement in the CV and PV businesses. JLR’s revenue surged 65.8% YoY to Rs. 71,396cr, with wholesale volume rising 29.9% YoY to 93k vehicles, on account of increased demand for luxury vehicles and continued improvement in semiconductor supply. CV revenue increased 4.4% YoY to Rs. 16,991cr, due to improved product mix and higher prices. This was despite a decline of 15.0% YoY in wholesale volumes. PV revenue rose 11.1% YoY to Rs. 12,839cr, due to growth of 7.7% YoY in wholesale volumes. New launches in the sport utility vehicle and EV categories supported growth in the PV business. Demand for EVs remained strong – the company registered record-high quarterly sales of 19,346 units (up 104.8% YoY).Key concall highlights

Key concall highlights

* JLR’s production and cash flow will be lower on a QoQ basis in Q2FY24 owing to plant shutdown for two weeks in August.

* Management expects the PV business to grow more than the CV business. However, it expects the heavy-CV segment to grow in double digits.

* It proposed to issue seven ordinary shares for every 10 differential voting right (DVR) shares.

Profitability back on track

EBITDA jumped 326.3% YoY to Rs. 13,560cr and EBITDA margin expanded 890bps YoY to 13.4%, benefiting from demand-pull strategy, better product mix and operating efficiencies. Consequently, net profit was Rs. 3,090cr (vs. net loss of Rs. 4,987cr in Q1FY23).

Valuation

We believe the company’s earnings performance will continue to improve in the coming quarters. With easing of chip supply, JLR should benefit from the healthy order book, driven by Range Rover Sport and ramp-up in Defender. Its Indian business is steadily recovering and anticipates sustained growth in the near term. Moreover, Tata Motors’ continuous efforts to minimize cost, mainly in the JLR business, and favourable product mix would further aid expansion in margins in the coming quarters. Hence, we upgrade our rating to BUY on the stock with a revised target price of Rs. 736 based on SOTP valuation

To Read Complete Report & Disclaimer Click Here

For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer 

SEBI Registration Number: INH200000345

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer