Q3FY24 Review: Tata Motors: JLR going strong, but India Auto softening

5 Feb 2024 , 11:18 AM

Tata Motors’ Q3 consolidated EBITDA beat by 2%, with 2% beat in JLR, 8% beat in standalone and miss in “Others”. JLR is ramping up production on the back of strong order-book and a rich mix, thereby generating strong margins and cash-flows. Analysts at IIFL Capital Services expect Q4 to be even stronger (largely seasonality). India margin performance was good in both CV and PV. However, the volume outlook of PV/CV industries in India is softening. New models from Tata in FY25 may help it perform better than PV industry.

Tata Motors has done well on improving profitability in both PV and CV in recent years. However, the industry outlook for PV and CV is softening and may limit volume growth in FY25. MHCV and LCV industries are currently clocking year-on-year decline in volumes. Management expects the situation to continue for the next two quarters. Management guided to sub-5% volume growth in PV industry in FY25 (similar guidance from Maruti). Tata will have the advantage of new models in FY25. If the models click (partly built into IIFL’s estimates), the company may be able to outperform the industry.

Overall, analysts at IIFL Capital Services have maintained their FY24-26 EBITDA estimates but upgraded EPS by 10%/7%/4% (depreciation, other income, tax-rate).