Buy Tata Motors Ltd For Target Rs.700 By Emkay Global Financial Services Ltd
TMCV reported an in-line Q4, with revenue growing 22% YoY driven by 6% QoQ rise in ASP and 19% YoY growth in volume (led by strong volume growth of 25% YoY in MHCVs). Q4 EBITDAM came in at 13.5% (vs 12.8%/12.2% in Q3FY26/Q4FY25), largely in line with consensus’ estimate. The management highlighted commodity inflation as a near-term headwind (~100bps impact already seen in Q4, with higher impact expected in Q1FY27). To tackle this, TMCV took a ~2% price hike in Apr-26; however, to maintain demand (seeing growth – Apr-26 MHCV retails up 20% YoY), the mgmt has taken a conscious call to not pass on the full commodity hikes, but rather play on cost control measures to protect margins. On growth, TMCV has guided for a mid-high single-digit outlook in Q1FY27, but no specific guidance shared for FY27. Given macro-led uncertainties (potential diesel hikes coupled with commodity pressures) and TMCV’s cautious stance on CV demand outlook in FY27 (uncertainty regarding fleet operator reaction to diesel price hikes), we cut FY27E/28E EPS by ~6/4%. Factoring in its weak growth/margin stance, we cut our target multiple to 14x FY28 EV/EBITDA (vs 16x). However, we still prefer 2Ws/CVs over PVs led by durable replacement-led demand cycle (refer to Favor 2Ws, CVs vs PVs; resilient margin in Ancillary monitorable). We maintain BUY on TMCV while cutting Mar-27E TP by ~14% to Rs600 from Rs700.
In-line revenue growth
TMCV reported an in-line Q4, with revenue up 22% YoY at Rs244.5bn (Street/Emkay estimates of Rs242.6bn/Rs247bn) driven by 6% QoQ ASP improvement and 13% YoY volume growth; EBITDA missed our estimates by ~9% (EBITDAM at 13.5% vs Emkay estimate of 14.7%) due to higher-than-expected operating costs, but was in line with street estimates. Adjusted PAT was up 33% to Rs21.9bn.
Earnings call KTAs
1) The management highlighted commodity inflation and potential diesel hikes as significant near-term headwinds (~100bps impact seen in Q4; higher hit expected in Q1FY27).
2) A ~2% price hike was taken in April; however, the mgmt has consciously chosen not to pass on the full commodity increase, but rather rely on internal cost levers to protect margins.
3) TMCV did not state its FY27 outlook, and prefers to view it quarter by quarter, given the diesel price uncertainty and commodity headwinds. However, for Q1FY27, it expects a mid-high single-digit growth topline growth.
4) Middle East and North Africa (MENA) exports need to be recalibrated (no shipments in Middle East in the last 2M), with overall demand sentiment still seen as cautious. However, it expects the 70k unit order for Yodha and Ultra T.7 from Indonesia (first shipment already at sea, rapidly ramping up deliveries) would be key to compensate for MENA weakness.
5) Iveco: The mgmt highlighted that all the substantive regulatory approvals are received; with only 2 financial regulatory approvals pending with France and Spain. It expects to close the Iveco deal by Q2FY27 (vs earlier expected to close in Apr-26). 6) Investment spends to remain at ~2–4% of revenue in FY27, with growth and technology as key priorities.
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