Tata Motors Q2 Results Review - JLR Outlook Improving; India Margin Disappoints: ICICI Securities

ICICI Securities Report

Tata Motors Ltd.’s Q2 FY23 performance was a mixed bag with Jaguar Land Rover margin back to 10%; however, India margin was impacted by 200 bps (QoQ) due to lag effect of higher input cost contracts trickling into numbers.

JLR’s Ebitda margin came in at 10.3%, up 400 bps QoQ, owing to a combination of better model mix, improved market mix, rising scale benefit amidst marginal forex losses. Range Rover and RR Sport refresh production picked up to 2400 units a week versus 6,000 units wholesale in Q1 FY23, and thus, the mix is set to improve further from Q3 FY23 with new chip supply agreement coming in place.

Thus, with most headwinds for JLR on the verge of being resolved, we believe JLR is likely to revert towards 12% margin levels, with scope to reverse £2 billion of working capital-related increase in debt. India business though impacted temporarily, is largely set to reach the targeted 10% Ebitda margin level in coming quarters with margin tailwinds coming in place.

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