Buy Tata Motors Ltd For Target Rs.810 By Motilal Oswal Financial Services Ltd
JLR 3QFY25 wholesales in line at 104.4k units
3QFY25 wholesales (excl. China JV) up 3% YoY; 9MFY25 volumes down 1% YoY
* Wholesale volumes (ex-China JV) grew 3% YoY (+20% QoQ) to 104.4k units (est. 100.4k), reflecting an improvement following supply disruptions in 2QFY25.
* Sales for Jaguar declined ~54% YoY to 5.6k units while the same grew ~11% YoY to 98.8k units for Land Rover. 9MFY25 overall volumes declined ~1% YoY.
* Compared to the previous year, wholesale volumes grew in North America (+44%) and Europe (+6%), while declining in China (-38%), the UK (-17%), and other regions (-1%).
* The overall mix of the most profitable Range Rover, Range Rover Sport, and Defender models was 70% of total wholesale volumes vs ~67% in the previous quarter. During the quarter, demand for Range Rover was particularly robust, with wholesale volumes rising 48% QoQ, driven partly by the resolution of temporary supply chain disruptions. Volumes were also up 22% YoY, reflecting sustained strong demand.
* Retail sales totaled 106.3k units in 3QFY25 (including China JV), marking a 3% decline YoY but a 3% growth over 2QFY25. Year-to-date retail sales reached 320.6k units, up 1% YoY.
* Valuation and view: Tata Motors Ltd (TTMT)’s stock has corrected ~32% from its peak, largely driven by muted growth estimates across underlying industries and cost-related pressure, particularly in JLR. While management has maintained its guidance for JLR during 2QFY25 results, we think it is likely to see persistent margin pressure over FY24-27, given: 1) weak demand in key regions; 2) rising cost pressure as it invests in demand generation; 3) normalizing mix; and 4) EV ramp-up, which is likely to be margin-dilutive. Even in India, both CV and PV businesses are seeing moderation in demand.
* The stock trades at 12.1x/13.4x FY25E/FY26E consol. EPS and 5.2x/4.6x EV/EBITDA. Reiterate Neutral with Dec’26E SOTP-based TP of INR810.
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