Tata Motors’ Q4 Earnings Disappoint Investors Despite Strong Performance, Stock falls 9%

Tata Motors’ Q4 Earnings Disappoint Investors Despite Strong Performance, Stock falls 9%

Tata Motors’ Stellar Q4 FY24 Results Met with Investor Skepticism, Stock Dips 10%

Tata Motors reported impressive Q4 FY24 results, with its net profit more than tripling compared to the previous year. While some investors welcomed this news, others remained skeptical about the sustainability of demand momentum. Consequently, Tata Motors’ stock dropped by nearly 10 percent at the opening on May 13, reaching Rs 950.

The company achieved a remarkable 222 percent year-on-year growth in consolidated net profit, amounting to Rs 17,407 crore. This significant increase was attributed to improved operating leverage, favorable commodity prices, and strong volume growth across various segments. Additionally, revenue from operations rose by 13 percent to reach Rs 1.2 lakh crore.

Tata Motors' Q4 Earnings Disappoint Investors Despite Strong Performance, Stock falls 9%
Tata Motors Showroom (Credit: Pasco Motors)

Tata Motors’ Q4 Earnings Disappoint Investors Despite Strong Performance, Stock falls 9% : Analysts Offer Diverse Views on Tata Motors’ Prospects as Electric Vehicle Momentum Grows

Several brokerages issued varied recommendations on the stock of the nation’s top electric vehicle maker. Tata Motors experiences an enhancement in free cash flow alongside a reduction in debt.

JPMorgan holds a positive outlook on the stock, giving it an ‘overweight’ rating and increasing the target price to Rs 1,115, suggesting a 13 percent upside from the current price. Analysts noted that Q4 results met expectations, but free cash flow (FCF) exceeded both projections and guidance. Jaguar Land Rover (JLR) reported a significant fourth-quarter FCF of GBP 892 million, which stands out. Management has reaffirmed its goal of attaining a net cash-positive position in JLR and on a consolidated basis by the conclusion of FY25.

Tata Motors and its subsidiary, Jaguar Land Rover (JLR), confront potential challenges related to demand.

Conversely, Nomura revised its rating for the stock from ‘buy’ to ‘neutral,’ citing potential demand risks for Jaguar Land Rover (JLR). The international brokerage mentioned in a report that passenger vehicles (PVs) may outpace industry growth while commercial vehicle (CV) growth could slow down.

The company foresees a slow beginning to FY25 due to an anticipated decline in domestic passenger vehicle (PV) demand amid ongoing elections. Shailesh Chandra, managing director of Tata Motors’ passenger vehicle division, explained in a post-result earnings call that they expect the industry to moderate, with growth likely to be below 5 percent. This projection is based on factors such as the exhaustion of pent-up demand, high channel inventory, and temporary dampening of demand in the first quarter due to election-related dynamics.

Morgan Stanley has downgraded the stock from overweight to equal-weight, indicating that the potential for further gains is restricted due to the exceptional performance in the previous year. They highlight that a substantial turnaround driven by a significant increase in electric vehicle (EV) adoption in FY25 could present a noteworthy upside risk to monitor.

Tata Motors’ margins could be impacted by Jaguar Land Rover’s (JLR) acceleration in electric vehicle (EV) production.

Motilal Oswal maintains its neutral position on the company, expressing concerns about Jaguar Land Rover’s (JLR) expansion into electric vehicles (EVs), which could potentially dilute margins. The brokerage also notes a slowdown in demand in both the commercial vehicle (CV) and passenger vehicle (PV) segments in the Indian market. While acknowledging Tata Motors’ strong performance in FY24, Motilal Oswal highlights looming challenges that could impact future performance.

Even though the overall outlook for passenger vehicle demand appears restrained, Tata Motors suggests that the premium luxury segment is expected to remain robust. According to data from the Federation of Automobile Dealers Associations (FADA), passenger vehicle sales in April saw a slight increase of 4 percent month-on-month, totaling 3,35,123 units.

Once again, the wholly-owned subsidiary of Tata Motors, Jaguar Land Rover (JLR), delivered strong performance in the quarter. JLR experienced a significant increase in revenue, reaching 7.9 billion pounds, marking an 11 percent growth compared to the fourth quarter of FY23.

In 2023, Tata Motors emerged as the top performer on the Nifty, achieving a remarkable gain of more than 100 percent.

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