Tata Motors shares may rally up to 28%, say analysts with eye on Jaguar Land Rover margin and volume

The brokerage’s remark comes against the backdrop of Tata Motors raising its guidance for JLR EBIT margins for FY24 to 8% from 6% earlier. During the second quarter of the financial year, JLR revenue surged 30.4% to £6.9 billion and its operating profit or earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin jumped 430 bps YoY to 14.9%.

In fact, Tata Motors Chief Financial Officer PB Balaji said in a post-earnings media call that a pick up in volumes and a continued strong mix will put JLR on track to achieve an EBIT margin of 10% by the financial year 2026.

Jefferies, however, pointed out that though JLR EBITDA sustained above £1 billion for the third quarter in a row, it was down 9% sequentially from an all-time high in the first quarter. Meanwhile, JLR expects higher Range Rover (RR) and RR-Sport capacity, the brokerage said.

Morgan Stanley, too, called it an impressive quarter from Tata Motors. It sees the company deleveraging further in FY24 and expects an EV scale-up in FY25.

It noted that the auto firm’s net debt has come down and India EV losses have narrowed. However, according to Morgan Stanley, a sharper-than-expected global luxury slowdown is a key downside risk to watch out for.

The brokerage remarks come as the carmaker expects a free cash flow of over £2 billion in FY24 and net debt to reduce to less than £1 billion by the end of FY24.