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Macro challenges yet not over both at JLR&S/A

View – Sharp stock correction still not make risk reward favorable!

TTMT’s 2QFY25 consol results were operationally weaker than expected led by supply disruptions at JLR (~16k units) dragged consol EBITDA miss of ~17%/20% to our/street estimates. JLR EBITDAM contracted 320bp YoY (-410bp QoQ) at 11.7% (est 13.2%) more than negating better S/A margins delivery at 12.4% (est 12%, +50bp YoY). On the positive side, deleveraging is on track with net auto debt stood at ~Rs220b (Vs Rs186b in 1QFY25) due to increased WC. While management sounded confident of full volume recovery in 3Q and have maintained JLR EBIT guidance of 8.5% (vs ~7% in 1H). This we believe is key to watch for as the EBIT margins are largely hinges on volumes given key margins drivers such as 1) peak LR contribution, 2) RM tailwinds and 3) controlled VME is now moderating QoQ given demand challenges cropping up in key markets like Europe, UK and China while the US is still strong.

We have liked TTMT given it’s improving India franchise, early leadership in EVs in India, and JLR’s improved profitability, standalone business is approaching cyclical volume moderation both in PV and CV whereas normalization of challenges at JLR can support earning momentum. We cut FY25/26 consol EPS by 14%-16% to reflect upon likely muted volumes at JLR, increased VME partially offset by better margins in domestic business. We maintained the stock to ADD with roll forwarded Mar’27 SOTP based TP of Rs948 (v/s Rs1,117 earlier). Despite sharp correction recently, we would still wait for better entry point. We like MM among OEMs.

Result Highlights – JLR supply disruptions dented earnings momentum

Consol revenues de-grew 3.5% YoY (-6.1% QoQ) at Rs1014.5b (est Rs998b) as S/A revenues de-grew 16.3% YoY at Rs155.2b (est Rs164b) and JLR revenues degrew 5.6% YoY at ~GBP6.5b (est GBP6.4b) as ASP grew 8.3% YoY/+4.8% QoQ at GBP77.9k/unit (est 78.8k/unit).

* Consol EBITDA de-grew 15% YoY (-24.7% QoQ) at Rs116.7b (est ~Rs140.6) with margins contracted 240bp YoY (-310bp QoQ) at 11.5% (est 14.1%, cons 14.2%).

* Segmental EBIT performance - 1) JLR at 5.1% (-220bp YoY/-380bp QoQ, est 7.5%) 2) Domestic CV at 7.8% (-20bp YoY/-120bp QoQ), 3) Domestic PV at 0.2% (+180bp YoY/-30bp QoQ).

* Adj.PAT came below at Rs35.6b (est ~Rs47.9b, cons ~Rs48.1b).

* CJLR performance - Revenues de-grew 14.1% QoQ at GBP310m as volume degrew 2.4%, EBITDA margins at ~16% (vs ~18% QoQ) and PAT at GBP5m (vs GBP10m QoQ).

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