Tata Motors Q4 Results Review: Turnaround Story To Continue In FY24, Say Analysts

Tata Motors Ltd. will continue its turnaround story in the current fiscal, driven by earnings growth at both its India business and the U.K.-based Jaguar Land Rover, analysts said.

The automaker reported consolidated net profit for the second straight quarter in the three-month period ended March after incurring losses for seven straight quarters. The company's consolidated net profit stood at Rs 5,408 crore for the fourth quarter, against a net loss of Rs 1,033 crore in the same quarter last year, according to its exchange filing. That compares with the Rs 3,866 crore consensus estimate of analysts tracked by Bloomberg.

• Revenue rose 35% to Rs 1.06 lakh crore. (Bloomberg estimate: Rs 1.03 lakh crore.)

• Ebitda rose 58% to Rs 13,114 crore. (Bloomberg estimate: Rs 12,181 crore).

• Ebitda margin stood at 12.4% versus 10.6%. (Bloomberg estimate: 11.9%).

While the luxury carmaker JLR has improved its performance in recent quarters with a better supply of semiconductors, the India passenger vehicle business' turnaround story saw significant gains in the year-ended March.

The company's passenger vehicle market share has jumped to 14% in the year-ended March from 5% in fiscal 2019–20.

Shares of the automaker rose 2.22% to Rs 527.40 apiece as of 9:25 a.m., compared with a 0.20% rise in the benchmark Nifty 50.

Of 35 analysts tracking the stock, 29 maintain a 'buy', three suggest a 'hold,' and three recommend a 'sell', according to Bloomberg. The average 12-month consensus price target implies an upside of 7.5%.

Here's what brokerages made of Tata Motors' Q4 performance:

• Retain 'buy' with a target price of Rs 665 per share, an implied upside of 29%.

• Expect both JLR and India's businesses to drive strong earnings growth and deleveraging in FY24.

• By FY25, expect Ebitda to be 2.1 times FY23 levels, earnings per share to be at an all-time high, and the auto balance sheet to turn into net cash.

• While truck market share has slipped to 50% in FY23 from 54% in FY22, it will broadly remain stable going forward.

• Maintain 'add' rating with a fair value of Rs 530 per share, implying a potential profit of 2.7%.

• Expect a gradual pick-up in JLR volumes driven by improvements in the supply chain.

• Concern about the slowdown in developed geographies continues for JLR.

• Increased consolidated ebitda estimates by 11–15% for FY2024–25 due to higher volume and average selling prices.

• Reiterate 'buy' with a target price of Rs 590 a share, implying a potential upside of 15%.

• Upgrade consolidated earnings-per-share estimates by 13% and 6% for FY24 and FY25, respectively, to factor in volume ramp-up at JLR and margin improvement in the India business.

• Free cash flow generation will be driven by strong operating cashflow and support from working capital release in the second half of the ongoing fiscal.

• India's businesses are focused on margin expansion as volume growth is likely to moderate in FY24.

• Maintain 'buy' rating with a target price of Rs 650 per share, implying a potential upside of 26%.

• Healthy profitability across businesses, volume recovery at JLR, and free cash flow targets for FY24 to support growth

• Demonstrated capability in newer technologies in the CV space and pricing discipline across industry to aid the aspiration of double-digit margins ahead.

• Risks include a lower than expected volume ramp-up at JLR and consequent FCF generation, along with a slower than anticipated margin recovery in Indian operations.