Tata Motors stock tumbles as Q3 earnings disappoint; brokerages turn cautious
Tata Motors shares plunged 9 per cent to a 52-week low as Q3 profit fell 22 per cent YoY, missing estimates. JLR performed well, but weak India CV growth dampened sentiment.
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Tata Motors shares plunged 9 per cent on January 30, hitting a 52-week low of Rs 684.25 on the BSE, as its Q3FY25 earnings fell short of market expectations. Despite reporting a three per cent year-on-year (YoY) increase in revenue to Rs 1.13 lakh crore, the company’s consolidated net profit dipped 22 per cent YoY to Rs 5,451 crore, significantly missing the ET Now poll estimate of Rs 6,791 crore. Investor sentiment took a hit as muted growth forecasts and weaker margins weighed on the stock.
JLR delivers, but challenges persist
Jaguar Land Rover (JLR), a key revenue driver for Tata Motors, posted record Q3 revenue of £7.5 billion, up 1.5 per cent YoY. However, profit before tax (PBT) declined to £523 million from £627 million in the previous year. The luxury carmaker's strong sequential recovery was overshadowed by concerns over softening demand in China and Europe. Analysts also flagged increasing warranty costs and growing competition in the EV segment as potential headwinds.
Weak CV and PV segments impact earnings
Tata Motors' commercial vehicle (CV) division struggled, with revenues declining 8.4 per cent YoY to Rs 18,400 crore. Although EBITDA margins improved by 130 basis points (bps) to 12.4 per cent, the broader slowdown in infrastructure spending and a high base effect limited growth potential. The company’s passenger vehicle (PV) business also posted a 4.3 per cent YoY decline in revenue at Rs 12,400 crore, despite steady volumes of 1.4 lakh units. Meanwhile, the electric vehicle (EV) segment registered a 19 per cent YoY rise in the domestic personal segment, though fleet sales dipped due to the expiry of the FAME II subsidy.
Brokerages turn cautious
Nuvama downgraded Tata Motors with a 'Reduce' rating, slashing its target price from Rs 750 to Rs 720, citing margin misses and muted growth prospects. It expects JLR volumes to contract at a -4 per cent CAGR due to an exhausted order book and the discontinuation of select Jaguar models. The India CV segment is also projected to grow at just one per cent CAGR due to sluggish demand. Jefferies took a more bearish stance, downgrading the stock to 'Underperform' with a revised target of Rs 660 (down from Rs 930), citing soft JLR demand, rising acquisition costs, and intensifying EV competition.
Outlook: What lies ahead?
Despite a challenging quarter, Tata Motors remains optimistic about long-term prospects, with management reiterating confidence in sustained earnings growth. However, external factors such as demand softness in key markets, rising input costs, and policy shifts in the EV space remain crucial determinants. Investors will closely watch upcoming quarters to assess whether the company can overcome these near-term hurdles and regain momentum in both domestic and international markets.
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