Tata Motors Shares Drop 9% as Weak Q3 and JLR Slowdown Raise Concerns

Tata Motors Shares Drop 9% as Weak Q3 and JLR Slowdown Raise Concerns

Tata Motors’ shares took a hit following weak earnings for Q3, as its performance fell short of expectations. The decline was driven by pressure on margins and sluggish demand, particularly in the Chinese market, which led brokerages to lower their price targets for the stock to as low as Rs 660.

The company reported a 22% year-on-year drop in its consolidated net profit, reaching Rs 5,451 crore for Q3 FY25. This underperformance was primarily due to reduced volumes in its luxury segment, Jaguar Land Rover (JLR), along with margin compression. Revenue rose by just 2.7% to Rs 1,13,575 crore, which was also below analyst predictions of Rs 1,16,873 crore.

EBITDA margins contracted by 60 basis points to 13.7% in Q3, reflecting higher costs and an unfavorable product mix. Concerns over demand, especially in China, and a reduction in the FY25 JLR revenue target by 3%, further added to the negative sentiment around the stock.

As a result, Tata Motors shares dropped 9% on January 30, reaching a low of Rs 683.20. At 11:34 AM, shares were trading at Rs 704.50, still near their 14-month low.

Brokerage firm Jefferies downgraded the stock to an ‘underperform’ rating after 3.5 years, slashing its price target to Rs 660. Although it expects some improvement in Q4 due to better seasonality, it lowered its EBITDA forecasts for FY25-27 by 7-11%, and earnings-per-share estimates by 5-10%.

Nuvama Institutional Equities also reduced its FY25 EBITDA target by 4%, predicting low growth in both revenue and EBITDA, with a compound annual growth rate (CAGR) of just 2% for FY25-27. Nuvama cited concerns over JLR’s order book depletion, the discontinuation of certain models, and subdued demand across regions.

The firm also expects muted performance from Tata Motors’ India commercial vehicle (CV) division, predicting only a 1% CAGR due to lower road construction spending and a high base. Consequently, Nuvama cut its price target for Tata Motors to Rs 720, maintaining a ‘reduce’ rating.

Morgan Stanley retained an 'equal-weight' call on Tata Motors with a price target of Rs 853, though it expressed disappointment over the reduced guidance for FY25 revenue and Return on Capital Employed (RoCE) for JLR.

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