Tata Motors shares gain post JLR’s 11% sales growth in Q4; check latest target prices
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The retail sales during the March quarter compared to the past year were up 32% in the UK, 21% in North America, and 16% overseas. In China, sales were down 9%, while it fell 2% in Europe for the quarter.
Full-year sales rose 20% YoY as wholesale volumes stood at 401,303, up 25%, while retail sales came at 431,733, recording a 22% growth, Tata Motors said.
Following the updates, global broking firm Morgan Stanley maintains an ‘Overweight’ rating on the Tata Motors stock with a target price of ₹1,013 per share.
The foreign brokerage said that the slower pace of electric vehicle (EV) adoption actually bodes well for Tata Motors’ free cash flow (FCF) outlook and capital return profile. It argues that a rapid transition to EVs could have been disruptive for the business, but the current pace allows for better adaptation and financial stability.
Morgan Stanley in a report said the March quarter mix was weak for JLR as premium models (Defender, RR and RR Sport) share was at 61%, compared to 62% in the third quarter of FY24. They expect JLR’s profit margin to be around 9.1% during the quarter, better than the previous quarter’s 8.8%.
Macquarie assigned an ‘Outperform’ rating on Tata Motors, saying JLR’s Q4 business update showed modest beat on wholesale. Macquarie has a target price of ₹1,028 per share on the auto stock.
Despite modestly beating wholesale expectations in JLR Q4 of FY24, the EBITDA margin could be flattish quarter-on-quarter given a 100 basis points decline in share of premium models and a higher incentive spend.
Macquarie estimates JLR’s EBIT margin to improve sequentially, and pointed out that the company has not shared JLR’s Q4 estimated free cash flow.
However, it believes that Tata Motors will successfully achieve its targeted net debt reduction to less than £1 billion for FY24.
Nomura also has a ‘Buy’ recommendation on Tata Motors and a target price of ₹1,057, suggesting an upside of over 4% from its last closing price. Nomura estimates that JLR will have a free cash flow (FCF) of GBP 600-700 million in the last quarter, which should help them reduce their net debt to less than GBP 1 billion.
At 9:25 am, the scrip was trading 0.86% higher at ₹1,021.95 apiece on the NSE. Tata Motors has been a multibagger stock with near 122% returns in the last 12 months. It has outperformed Nifty Auto and Nifty50 during this period with returns of 75% and 30%, respectively by both these indices.
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