Stock Market Today: Tata Motors’ share price has risen by 46.6% so far in 2024. Strong passenger vehicle growth, a stable commercial vehicle outlook despite hurdles, an emphasis on electric vehicles, and JLR expectations have all contributed to the surge in Tata Motors’ share price.
However, investors remain apprehensive ahead of Q1 earnings, with Tata Motors’ share price trading more than 1% down on Thursday during morning exchanges.
Industry scenario and expectations
During the first quarter, passenger vehicle volumes increased by roughly 6%, while commercial vehicle volumes increased by about 4%. Tata Motors’ commercial vehicle volumes in India increased by 5.4% year on year in Q1, while PV volumes fell somewhat.
Raw material prices, particularly for aluminum, copper, and precious metals, have risen. Despite falling steel prices, the operating performance of various manufacturers such as Tata Motors will be closely monitored, however, analysts remain optimistic about Tata Motors’ cost-cutting activities.
According to Axis Securities data, average steel HRC prices (ex-Mumbai trading market) remained sluggish in Q1FY25, but aluminum, copper, and lead prices increased by 4-15% sequentially.
Similarly, Platinum and Rhodium prices have risen by 8% and 5%, respectively, while Palladium has fallen by 1% sequentially. These pricing fluctuations are projected to have a detrimental impact on profitability.
Expectations at Tata Motors
Nuvama Institutional Equities predicts that Tata Motors’ revenue growth will continue year-on-year, driven by advancements in the JLR (Jaguar Land Rover) and India Commercial Vehicles divisions. They also expect the EBITDA margin to increase due to better pricing and cost-reduction strategies.
EBITDA stands for earnings before interest, taxes, depreciation, and amortization.
According to Motilal Oswal Financial Services, India’s business performance was mixed, with commercial vehicle volumes increasing by 6% year on year and passenger vehicle volumes down by 1%. According to them, the commercial vehicle and passenger vehicle EBIT margins are anticipated to decrease by 190bp and 50bp sequentially due to lower volumes.
JLR volumes, on the other hand, are forecast to grow by 3% year on year, with MOFSL estimating an EBIT margin of 7.5% (170bps worse sequentially), owing to an unfavorable product mix, rising costs, and lower volumes. MOFSL expects the merged firm to generate an 8.5% YoY rise in 1Q earnings.
According to Jefferies (India) Pvt Ltd, Tata Motors’ JLR shipments (excluding the China JV) increased 5% year on year (11% down sequentially), but the volume share of higher-margin models (RR, RR Sport, and Defender) increased to 68% in 1QFY25 compared to 63% in FY24.
Tata Motors Expectations:
According to Nuvama Institutional Equities, Tata Motors’ year-on-year (yoy) revenue growth will be underpinned by growth in its JLR (Jaguar Land Rover) and India Commercial Vehicles businesses. Ebitda margins are likely to grow as a result of improved pricing and cost-cutting efforts, they noted.
Ebitda is an acronym for earnings before interest, tax, depreciation, and amortization.
According to Motilal Oswal Financial Services, India’s business performance was mixed, with commercial vehicle sales increasing 6% year on year and passenger vehicle volumes declining 1% year on year. According to them, the commercial vehicle and passenger vehicle EBIT margins are anticipated to decline sequentially by 190bp and 50bp, respectively, due to lower volumes.
JLR volumes, on the other hand, are forecast to grow by 3% year on year, with MOFSL estimating an EBIT margin of 7.5% (170 basis points worse sequentially), driven by an unfavorable product mix, rising spending, and lower volumes. Overall, MOFSL expects the consolidated firm to generate an 8.5% YoY rise in first-quarter earnings
Tata Motors’ JLR shipments (excluding the China JV) increased 5% YoY (11% lower sequentially), but the volume proportion of higher-margin models (RR, RR Sport, and Defender) increased to 68% in 1QFY25 from 63% in FY24, according to Jefferies (India) Pvt Ltd.
Monitorable Key
The management’s perspective on JLR and India’s CV demand outlook would be important to monitor during the Q1 results.
