Shares of Tata Motors hit an over six-year high of Rs 537.15, as they rallied 4 per cent on the BSE in Monday’s intra-day after the company reported better-than-expected March quarter earnings (Q4FY23), with consolidated net profit at Rs 5,408 crore backed by a resurgence in Jaguar Land Rover (JLR) volumes and strong growth in the Indian market. Tata Group passenger cars & utility vehicles maker had posted a loss of Rs 1,033 crore in the same quarter last year.
Thus far in the calendar year 2023, Tata Motors has outperformed the market, by surging 34 per cent, as compared to 1.4 per cent rise in the S&P BSE Sensex. The stock had hit a record high of Rs 612.05 in February 2015.
Tata Motor’s consolidated revenue grew 35.1 per cent year-on-year (YoY) to Rs 1.06 trillion. Reported earnings before interest, taxes, depreciation, and amortization (ebitda) margin improved 210 bps to 13.3 per cent. The India business net debt was lowest in 15 years at Rs 6,200 crore.
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Tata Motors said volumes continued to improve on strong India demand and better supplies at JLR. Pricing actions and richer mix led to improved ASPs and higher revenue growth. Easing inflation, better mix, pricing actions and favorable operating leverage resulted in strong improvements in margins and profits, the company said.
Also read: Improving JLR outlook, margin expansion targets positives for Tata Motors
Tata Motors also declared its first dividend in nearly seven years, announcing Rs 2 per share for the financial year 2022-23 (FY23). Last time, the company had paid dividend of Rs 0.20 per share for the financial year 2015-2016 (FY16). This decision reflects the management's confidence in the company's future prospects and commitment to rewarding shareholders.
On FY24 outlook, Tata Motors said it remains optimistic on demand despite near term uncertainties while anticipating moderate inflation. The company aim to improve further and deliver a strong performance in financial year 2023-24 (FY24). The momentum is expected to build through the year factoring in seasonality, stabilization of JLR supply chain and post RDE impact in India, the company said.
JLR’s order book at 200,000 units remains strong despite increased retail sales. Range Rover, Range Rover Sport and Defender represent 76 per cent of the order book, Tata Motors said.
Looking ahead on JLR, the management expects the gradual improvements in chip supply to continue during the next fiscal year. While supply challenges and macro risks remain, are targeting to grow wholesales through the year and achieve EBIT margins of over 6 per cent in FY24.
Investment spending is expected to increase to about £3 billion in the fiscal year, but free cash flow (FCF) is expected to be GBP 2 billion and net debt is expected to reduce to <GBP 1 billion by FY24, the company said.
Analysts at ICICI Securities maintain BUY rating on Tata Motors amid healthy profitability across all business segments, JLR's volume recovery on the anvil, reiterated focus towards EV space at JLR coupled with healthy FCF generation targets for FY24E.
“Upgrading our estimates and rolling over our valuations to FY25E we now value Tata Motors at Rs 650 on SOTP basis (8x, 2x FY25E EV/EBITDA on India, JLR; Rs 150 value to Indian EV business, stake in Tata Technologies),” the brokerage firm said in result update.
According to Motilal Oswal Financial Services, Tata Motors should witness a healthy recovery as supply-side issues ease (for JLR) and commodity headwinds stabilize (for the India business). It will benefit from the commercial vehicle (CV) upcycle and stable growth in Passenger Vehicles (PVs), company-specific volume/margin drivers, and a sharp improvement in FCF as well as reduction in net debt in both JLR and the India businesses, the brokerage firm said in its result update.
The brokerage firm Ventura Securities is expecting a strong recovery in Tata Motor’s financials as supply-side issues are relaxing (for JLR) and commodity headwinds are easing (for PV and CV). It could improve the margin profile of the company and enhance its FCF generation, it said.