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View – JLR supply disruption yet unknow, can dent earnings momentum

TTMT’s 1QFY25 consol results were operationally in-line to street while better to our estimates with EBITDA beat ~7.4% with consol margins at 14.4% (est 13.8%). Deleveraging is on track with net auto debt stood at ~Rs186b (vs ~Rs160b in FY24 and Rs437b in FY23. The company did maintain EBIT guidance at ~8.5% for FY25E (vs 8.5% in FY24), is despite it called out production constraints in 2Q/3Q led by plant shut down and floods at key aluminum supplier. This we believe is key to watch for as the EBIT margins guidance 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. This reflects in order book at ~104k units in 1QFY25 (vs ~133k at end of FY24, 150k in 3Q and 168k in 2Q).

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 near term anticipated challenges at JLR can dent earning momentum. We raise FY25/26 consol EPS by 2%/1% to reflect upon likely muted volumes at JLR partially offset by increase in in the domestic business margins led by CV. We estimate revenue/EBITDA CAGR of 7-10% in FY24- 26E and maintained the stock to ADD with SoTP based TP of Rs1,240 (v/s Rs1,196 earlier).

Result Highlights – Steady performance across business

* Consol revenues grew 5.7% YoY (-9.9% QoQ) at Rs1080.5b (est Rs1047.1b) as S/A revenues grew 6.5% YoY at Rs168.6b (est Rs172b) and JLR revenues grew 5.4% YoY at GBP7.3b (est GBP7.8b) as ASP grew ~1% YoY/~5.5% QoQ at GBP74.4k/unit (est 72.2k/unit).

* Consol EBITDA grew 14.4% YoY (-8.7% QoQ) at Rs155.1b (est ~Rs144.4) with margins expanded 110bp YoY (+20bp QoQ) at 14.4% (est 13.8%, cons 14.1%).

* Segmental EBIT performance - 1) JLR at 9% (+30bp YoY/-20bp QoQ, est 8.8%) led by lower depreciation due to phase out of XE, XJ and F type. 2) Domestic CV at 9% (+280bp YoY/-60bp QoQ), 3) Domestic PV at 0.5% (flat YoY/-250bp QoQ).

* Adj.PAT came in-line at higher Rs57.8b (est Rs54.5b, cons Rs53.1b).

* CJLR performance - Revenues grew 8.7% QoQ at GBP361m as volume grew 13.5%, EBITDA margins at ~18% (vs ~15% QoQ) and PAT at GBP10m (vs GBP7m QoQ).

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