7% increase in Tata Motors share: a record high jump after Quater 3; Want to buy?

Tata Motors Q3 results: The automaker increased from as much as Rs 63.2, or 7.18%, to an all-time high of Rs 942 a piece after the Tata Group auto giant reported a better-than-expected set of financial results for the October-December (Q3 FY24) period.

Tata Motors’ revenue in Q3 FY24 rose 24.9% to ₹110,577 crore from ₹88,489 crore, YoY. Its revenue from the British luxury car unit, Jaguar Land Rover (JLR), jumped to ₹76,665 crore from ₹58,863 crore, YoY.

Tata Motors share price NSE: Tata Motors emerged as the top gainer on the Nifty50 index in opening deals on Monday, February 5. Tata Group, an auto giant whose popular cars include Nexon and Punch, reported a better-than-expected set of financial results for the October-December (Q3 FY24) period.

Tata Motors’ share price has increased by over 11% in the last month and more than 44% in the last three months. The stock has doubled investors’ money in one year, as it jumped over 110% during the period. Tata Motors’ share price increased over 7% to open at a fresh 52-week high on Monday after the auto major reported strong Q3 results with a two-fold jump in its consolidated net profit. Tata Motors shares gained as much as 7.19% to ₹942.00 a piece on the BSE.

In the third quarter of FY24, Tata Motors recorded a net profit of ₹7,025 crore, marking a substantial growth of 137.5% compared to ₹2,957.71 crore in the same period of the previous year. This remarkable increase was attributed to robust demand for both passenger and commercial vehicles, strategic price hikes, and an enhanced product mix.

Operating performance during the December quarter improved as EBITDA increased by 42.5% YoY to ₹15,333 crore and the EBITDA margin expanded by 171 basis points (bps) to 13.94%.

Global brokerage firm Jefferies raised FY24–26 EPS estimates for Tata Motors by 7–11%. It has a ‘Buy’ rating on the stock and increased the target price to ₹1,100 per share.

Nomura said Tata Motors’ Q3 JLR margins were ahead of estimates and believes further re-rating is likely. It expects the success of electric vehicles (EVs) to drive JLR ratings. It has a ‘Buy’ call on the stock with a target price of ₹1,057 per share.

Tata Motors’ overall earnings (EBITDA) were slightly below what Kotak Institutional Equities had predicted. However, the earnings for Jaguar Land Rover (JLR) and the domestic commercial vehicle (CV) business turned out better than expected, thanks to favourable factors like lower material costs and an improved mix of products. On the flip side, earnings for the domestic passenger vehicle (PV) business were impacted due to higher costs associated with developing electric vehicles.

Looking Ahead:

We remain positive on all three auto businesses. We expect the performance to further improve in Q4 on account of seasonality, new launches, and improving supplies at JLR. We achieved a net debt reduction of ₹9.5K Cr in Q3, and we are confident of achieving our deleveraging plans.

PB Balaji, Group Chief Financial Officer, Tata Motors, said: “It is satisfying to see our businesses execute well on their differentiated strategies and deliver a strong set of results for the quarter, thereby making it six quarters of consistent delivery. We aim to end the year on a strong footing and remain confident of sustaining our performance in the coming quarters and delivering on our de-leveraging plans.”

Looking forward, the domestic brokerage firm is optimistic about Tata Motors’ performance from 2024 to 2026. They expect improvements in the JLR business, sustained demand, increased market share in PV and CV segments, and a positive cash balance by 2025.

To account for these positive expectations, the brokerage has raised its estimates for Tata Motors’ consolidated earnings by 1-3%, mainly because they anticipate higher profit margins in both the JLR and CV segments. Additionally, they have increased their projections for JLR earnings by 2–4%, anticipating better profits due to a more lucrative product mix and effective cost management.

Kotak Equities upgraded Tata Motors stock to ‘Add’ from ‘Reduce’ earlier and raised the target to ₹950 per share from ₹800 earlier.

At 9:20 am, Tata Motors shares were trading 6.88% higher at ₹939.25 apiece on the BSE

HSBC has maintained a hold call on the counter with a raise in target to Rs 920 from Rs 730. Continued to beat estimates, led by benign global demand, pricing, and continued RR demand, according to HSBC.

According to HSBC, the near-term outlook is still strong and may keep stock buoyant; the launch of CURVV is a key indicator for domestic business. The valuation looks too puny, as per the brokerage.

Morgan Stanley continues to recommend an overweight position for JLR, emphasizing the positive impact of de-leveraging and the electric vehicles (EVs) propelled by the passenger vehicle (PV) turnaround. The brokerage has revised its target from Rs 890 to Rs 1,013.

What is EBITDA?
EBITDA, in its full form, stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is an alternate method of measuring profitability in terms of net income. It strips out the non-cash depreciation, amortization expense, taxes, and debt costs that are dependent on the capital structure.

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization

EBITDA vs Net Income
EBITDA is considered an indicator of a company’s capability to sustain its profitability. It helps to analyze a company’s operating profit and overall performance. On the other hand, net income tends to highlight a company’s aggregate earnings.

Disclaimer: The above views and recommendations are those of individual analysts or broking companies and not of Trends on Chai. We advise investors to check with certified experts before making any investment decisions.