Tata Motors share prices nosedived 8% in early trade after the auto giant reported a 22.5% YoY decline in net profit for Q3FY25. The auto major clocked a miss in realisation/margin in JLR and the India CV division. The management has cut FY25E JLR revenue guidance by 3%. No points for guessing, the results fell short of market expectations, resulting in most brokerages taking on cautious stance.
In the early hours of today’s trading session, Tata Motors share price opened at Rs 688.65, a sharp decline of 63.85 points or 8.49%. Furthermore, the stock is now 0.8% away from its 52-week low of Rs 683.20, highlighting of a significant downward pressure in early trading.
What do brokerages say?
Following the announcement of the financial results for the quarter ending December 31, 2024, leading brokerages have provided their revised ratings and target prices for Tata Motors. Let’s take a look into it detail:
Jefferies: Downgrades to underperform
International brokerage firm, Jefferies has downgraded Tata Motors to an Underperform rating, drastically reducing its target price from Rs 1,000 to Rs 660 per share.
The brokerage firm pointed to a 16% YoY decline in Q3 EBITDA, which came in 19% below estimates. Moreover, it highlighted of the ongoing challenges at JLR, with weak demand in China and Europe, rising customer acquisition costs, and higher warranty expenses. According to the brokerage firm, the India Commercial Vehicle (CV) and Passenger Vehicle (PV) segments are showing signs of slowing demand, compounded by increasing competition in the electric vehicle (EV) market. While Jefferies expects a better Q4, they have revised down FY25-27 EBITDA and EPS estimates by 7-11% and 5-10%, respectively.
Nuvama retains Reduce rating, cuts target price
Nuvama has retained the ‘Reduce’ rating on the stock with an SotP-based Target price of Rs 720. This is lower than their earlier estimate of Rs 750. They are building in a “muted 2% revenue CAGR over FY25–27E, owing to volume decline at JLR (-4% CAGR) and muted growth in the India CV” sector. Moreover, they see the CV sector to be muted, ” owing to moderate road construction spends and a high base. This weakness in demand outlook should also increase costs led by greater marketing & sales promotion spends in global and domestic markets. We expect a 2% EBITDA CAGR as the negative impact of higher marketing spends and lower scale is likely to be offset by cost-saving efforts.”
Morgan Stanley: Balanced approach with a Cut in target
Morgan Stanley has maintained an Equal Weight rating but lowered the target price from Rs 920 to Rs 853 per share. As per the brokerage firm, the downgrade is due to a weaker than expected average selling prices for JLR, which drove the Q3 miss. However, the firm has maintained its EBIT margin guidance for JLR for FY25.
Further, the brokerage expects a stronger performance in Q4 but are cautious about JLR’s performance moving forward.
Goldman Sachs: Neutral view
The brokerage firm, Goldman Sachs (GS) has maintained a Neutral stance on Tata Motors, setting a target price of Rs 800 per share.
The brokerage firm noted that Q3 results were broadly in line. The firm is expecting modest volume growth for JLR and PV, forecasting low EBITDA growth for FY25-27.
CLSA: Positive with higher target price
CLSA however has a contrarian view. It remains optimistic about Tata Motors’ long-term prospects and maintains an Outperform rating. They have set a target price of Rs 930 per share, indicating a potential upside from current levels.
They believe that Tata Motors will have a stronger Q4 performance, with JLR targeting an EBITDA margin of around 10% for the quarter, ending the year with an approximate margin of 8.5%.
Tata Motors Q3FY25 earnings
The company posted a net profit of Rs 5,451 crore in Q3FY25, compared to Rs 7,025 crore in the same period last year.
Despite the profit dip, Tata Motors saw a modest 1.8% increase in revenue to Rs 1.13 lakh crore, up from Rs 1.11 lakh crore in Q3FY24. However, the company’s EBITDA slipped 14.7% to Rs 13,081 crore from Rs 15,333 crore.
Tata Motors stock performance and market cap
On the previous trading session, Tata Motors’ stock closed at Rs 754.80, up 3.65%. The company currently holds a market capitalisation of Rs 2.77 lakh crore. Its 52-week high stands at Rs 1,179, while the 52-week low is Rs 707.50.
Tata Motors share price has been on a downward trend. In the last five days, it fell by 7.09%. Over the past six months, the stock saw a sharp decline of 40.14%. Looking at the one-year performance, Tata Motors share price dropped by 19.02%.
About Tata Motors
Tata Motors is a key player in the automobile industry and operates across multiple segments. A part of the Tata Group, Tata Motors is headquartered in Mumbai. Founded in 1945, the company at the initial phase focused on manufacturing locomotives before expanding into the automotive industry. Today, its diverse portfolio includes cars, trucks, buses, and vans. It also owns the luxury car brand Jaguar Land Rover and operates Tata Daewoo, its South Korean subsidiary.