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Strong India PV momentum offset by weaker JLR outlook; d/g to ADD

We downgrade TMPV to ADD (from Buy), with an SOTP-based TP of Rs400. TMPV logged a weak Q2, with consolidated revenue down 14% YoY and a negative EBITDAM (-1.9% vs 11.9% YoY) on a sharp drop in JLR (cyberattack wiped out production of 20k units in Q2), leading to a 24% YoY revenue drop and EBITDAM of -1.6%. The management commentary for JLR is cautious, highlighting that even after the cyber disruption fading by Q3 (production to be impacted by an additional 30k units), structural challenges persist (worsened luxury demandglobally, rising VMEs, structural headwinds from US tariffs and China’s luxury tax). This has led to a cut in FY26 EBITM guidance to ~0–2% (vs ~5–7% earlier) and a steep revision in the FCF guidance to – £2.2–2.5bn (vs net zero earlier). India PVs continue to build momentum with a favorable product cycle, reflected in record festive retails, a richer ~45% EV+CNG mix, rising EV profitability aided by the Rs32.5bn PLI, strong demand for Harrier.EV (16–18 weeks waiting), and upcoming Sierra/Sierra EV and Harrier–Safari ICE launches that are expected to aid mix/margin recovery from Q4. However, given JLR’s dominant contribution (~80% of Q2 topline) and the materially weaker demand, margin, and FCF outlook for FY26–27, we turn cautious despite the constructive India PV setup.

Weak Q2 print dragged by JLR; India PVs managed to sustain the momentum

Consolidated revenue fell 14% YoY to Rs723.4bn. EBITDAM slipped to –1.9% (Q2FY25: 11.9%), entirely driven by JLR, where revenues fell 24% YoY/26% QoQ to £4.9bn due to the month-long production shutdown following the cyber incident, which caused a 24% YoY drop in wholesales to 66.2k units and the EBITDAM decline to –1.6% (Q2FY25: 11.7%). In contrast, Indian PVs delivered a resilient Q2, with revenue up 7% YoY and EBITDAM at 3.9% (up by 50bps QoQ), on strong festive demand.

Earnings call KTAs 1) JLR: Q2 operations were disrupted by a cyberattack, resulting in the complete loss of Sep production (~50k units, with ~20k lost in Q2 and ~30k spilling into Q3). FY26 FCF guidance was revised to –£2.2–2.5bn (net zero in Q1); the mgmt does not expect meaningful cash recovery before FY27. US import tariffs and China’s higher luxury tax threshold would pressurize margins over 12–18M, while UK/EU duties, though renegotiated lower (10–15%), would drag. TMPV noted weaker luxury demand globally, rising VMEs, and cost pass-through delays, leading to a downward revision in JLR’s margin to ~0-2% for FY26 (5-7% earlier). 2) PVs: India saw a sharp demand recovery post-GST cut, with record retail volumes during Sep–Oct (up 5% in Sep and 17% in Oct), even as dealer inventories fell to 27 days, one of the lowest in years. EV+CNG models now form ~45% of domestic PVs, with quarterly EV volumes reaching 24k units, led by Nexon EV and Harrier.EV, which significantly boosted realizations (~15% YoY). 3) The mgmt guided for doubledigit H2 growth and ~5% YoY growth for FY26, aided by post-GST traction in compact and subcompact SUVs; it targets double-digit EBITDA margins in the Indian PV business in the near term, driven by product mix enrichment, structural cost-savings (1–2% annually), normalization of commodity costs.

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