Tata Motors is a key stock in focus as Nomura continues to have a Reduce rating on this auto major from the Tata Group. The target price is set at Rs 799 per share, implying slightly more than 10% upside from current levels. According to Nomura’s estimates, JLR’s margins are likely to hover at 5.2%, near the lower end of the company’s guided range.
Nomura on Tata Motors: JLR the big worry
According to the Nomura report, JLR’s performance is a key cause for concern. JLR’s retail volumes declined 15.1% YoY, while wholesale volumes decreased 10.7% YoY.
If Chery-JLR China JV numbers are excluded, wholesale volumes in Q1FY26 were at 87,200 units, down 10.7% YoY and 20.8% QoQ.
Overall sales from other regions grew 8.8%, but North America specifically clocked a 12% de-growth. Europe too was under pressure, down 13.6%, as was UK, which reported 25.5% de-growth. As a result, Nomura estimates wholesale of 3,94,000 units in FY26 and 4,11,000 units in FY27.
Nomura on Tata Motors: Weakness in UK, EU a negative surprise
Nomura highlighted that the weakness in the UK / EU volumes has surprised the brokerage firm, “negatively although US volumes were better than our estimates.”
They pointed out that JLR’s mix of its top 3 models (RR, RR Sport and Defender) increased to 77% in Q1FY26 from 66% in the prior quarter. As the “China mix grew to 13% from 8%” in Q1, “this will be a positive for mix and should lead to 8% improvement in ASPs, on our estimates.”
Nomura on Tata Motors: Tariff worries for JLR
They also expect “the Q1FY26 margins to be low due to tariff uncertainty.” According to them, “the impact on the quarter is likely to be 300 bps, factoring in tariffs.”
As per the recent announcements, the “deal to export cars from the UK to the US at a 10% tariff came into effect on June 30, but the exports of Defender from the EU to the US continue to face 25% tariffs.”
The company has reduced incentives by 100 bps QoQ in the US. Thus, Nomura estimates the “EBIT margin for JLR at 5.2%, near the lower end of the company’s guided range.”
Their FY26 and FY27 margin outlook is at 6.1% / 8.3%, respectively. This is around the levels that the Tata Motors management guided for. Tata Motors expects margins to be at 5-7% for FY26 and rising towards 10% by FY27-FY28.
Overall, Nomura values Tata Motors at 4.4x FY26F EV/EBITDA. They estimate free cash flow to have reached an outflow of 1 billion pounds in Q1FY26, mainly driven by working capital due to lower volumes and seasonal effects.