Tata Motors rallies nearly 8% on strong JLR sales in March quarter; Analysts bullish with an eye on margins

• Tata Motors stock is the top gainer on the 50-stock Nifty50 index after its March-quarter update that showed recovery in the reeling JLR volumes.
• Analysts have lauded the automaker’s improvement in sales, highlighting better chip supply and better-than-expected booking run rate for JLR.
• Global sales for Jaguar Land Rover (JLR) stood at 1.07 lakh vehicles for the March quarter, with Jaguars accounting for 15,499 units and Land Rovers for 91,887 units.

Shares of Tata Motors rose on Monday after the automaker’s global wholesale vehicle sales recorded an 8% on-year growth for the March quarter despite high inflation and rising borrowing costs, topping analysts’ expectations.

Global sales for Jaguar Land Rover (JLR) stood at 1.07 lakh vehicles for the March quarter, with Jaguars accounting for 15,499 units and Land Rovers for 91,887 units.

Shares of Tata Motors were the top gainers on the 50-stock Nifty50 index after its March quarter update that showed recovery in the reeling JLR volumes.

Analysts have lauded the automaker’s improvement in sales highlighting better chip supply and a better-than-expected booking run rate for JLR.

“All three businesses of Tata Motors are in a recovery mode. While the India CV (commercial vehicles) business will see a cyclical recovery, the India PV (passenger vehicles) business is seeing a structural recovery. JLR is also witnessing a cyclical recovery, supported by a favourable product mix,” said analysts at Motilal Oswal.

“However, supply-side issues will delay the recovery process. While there will be no near-term catalysts from the JLR business, the recovery in the India business (~50% of the sum of the parts (SoTP) will continue,” added the report.

Adding to the investor cheer, in March, the automaker sold 46,847 cars, overtaking rival Hyundai in the domestic passenger vehicle sales segment. In comparison, Hyundai sold 45,703 cars during the same month.

Tata Motors registered a 27% on-year increase in passenger vehicles sales for March, far ahead of Hyundai, which registered a growth of 4.4%. The former increased its market share to 13.39% in FY23 while the latter’s market share fell to 14.51%.

“We expect the demand for personal vehicles to remain robust with the trend of electrification further strengthening,” said Shailesh Chandra, MD, Tata Motors Passenger Vehicles.

Goldman Sachs has upgraded its rating on Tata Motors to Buy while raising the target price to ₹550 from ₹480 to factor in an improving volume outlook at JLR. It has also raised its FY24-25 EBITDA estimates by 15%/16% while saying that the market was underestimating JLR’s EBIT margin potential.

EBITDA stands for earnings before interest, taxes, depreciation and amortisation while EBIT is earnings before interest and taxes.

Tata Motors stock flies high with 17% gains in 2023 so far
Besides, the stock has been on an uptrend this year because of its growing auto sales – shares of Tata Motors have surged 17% in 2023 so far.

The automaker has been in a recovery mode since the December quarter when it reported a profit for the first time after seven quarters of losses.

Adding to it, the auto industry has recently hiked prices of vehicles from the start of the new fiscal year. Typically, automakers hike prices of vehicles effective from April 1. This time, the price hikes are led by high inflation and regulatory requirements.

Along with Tata Motors other automakers including Maruti Suzuki, Honda and Hero MotoCorp have increased prices of their vehicles to comply with new regulatory norms required for a cleaner environment.

The Indian auto industry has geared up to meet the stricter emission norms under phase two of the BSVI standards. From April 1, vehicles will need to have an onboard diagnostic (OBD2) device to monitor the real-time driving emission levels to meet the stricter emission norms.

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