Global brokerage firm UBS, which maintained a sell call on the stock with a target price of Rs 825, noted that while the commercial vehicles (CV) business was strong, passenger vehicles (PV) were weak, and JLR mixed.
Apart from risks from subdued global demand and margin headwinds at JLR, recent supplier-based constraint may pose as an incremental headwind in the near term, analysts say.
“This, coupled with demand moderation in its India CV and PV
businesses, raises concerns about Tata Motors’ ability to sustain the current level of profitability going forward,” Motilal Oswal said.The brokerage expects JLR margins to see limited expansion over FY24-26, given rising cost pressure as it invests in demand generation, normalizing mix, and EV ramp-up, which is likely to be margin dilutive.Nuvama is building in a 6% revenue CAGR over FY24–27E versus a 21% CAGR over FY21–24, owing to muted volume growth for JLR (1% CAGR) and the India CV division (1% CAGR).”JLR’s order book has reduced from 133,000 units in Mar-24 to 104,000 units in Jun-24. This exhaustion in order book coupled with a high base should lead to single-digit growth in FY25E. JLR’s peer Mercedes recently indicated flat volume outlook for CY24 while Audi indicated flat-to-lower volume expectation for CY24. Furthermore, we expect a muted performance in the India CV division owing to competition from Railways (DFC), slowdown in infra spends and a high base,” the brokerage said.
Nuvama has a reduce rating on Tata Motors with a target price of Rs 1,144.
Among the bulls, Nomura raised the target price to Rs 1,303 saying that JLR’s transition to luxury will support average selling prices and margin expansion, underpinned by its improving mix and more premium positioning.
JP Morgan has also raised the target price to Rs 1,250 while CLSA sees the stock at Rs 1,181 and Jefferies at Rs 1,330.