Tata Motors Share Rises 3% as Analysts Remain Positive Despite Q2 Earnings Miss

Tata Motors, India's largest electric vehicle manufacturer, saw a strong start in the stock market, rising 3% to ₹829 despite reporting weaker-than-expected earnings for the second quarter. The company’s net profit dropped 11% year-on-year to ₹3,343 crore, primarily due to underperformance in both its Jaguar Land Rover (JLR) division and commercial vehicles sector.

On Friday, Tata Motors share price had closed 2% lower at ₹803.55, a significant decline from its recent peak of ₹1,179. This correction has erased much of its 2024 gains, leaving it flat on a year-to-date basis.

In a cautious statement, the company indicated concerns over short-term domestic demand but noted that the festive season and increased infrastructure investment might provide a boost. Management cited external factors that impacted Q2, particularly a flood at its Nivelles facility that capped production at 86,000 units. Despite this setback, JLR CFO Richard Molyneux emphasized the company's strong profitability and expressed confidence in a robust second-half recovery.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Even with the Q2 performance falling short, analysts remain largely optimistic about Tata Motors, though many have revised their price targets downward. CLSA upgraded the stock to "outperform" following the September quarter, setting a target of ₹968 after the recent price correction, while shares are down 32% from their recent high.

Tata Motors continues to project an EBIT margin for JLR of around 8.5% for this fiscal year and 10% by 2026. Nomura, maintaining a "buy" rating, has reduced its target price to ₹900 from ₹1,303, citing a weaker-than-expected Q2 but a likely rebound in India’s CV segment by Q4 and JLR's performance relative to its peers in various markets.

Also check Tata Shares - Group Stocks

Jefferies also reaffirmed its "buy" rating, though it lowered its target to ₹1,000 from ₹1,330 and adjusted its EPS estimates for fiscal years 2025-2027 down by 2% to 9%. UBS, however, maintained a "sell" recommendation with a target of ₹780, pointing to disappointing EBIT quality and a revised useful life for ICE models that led to lower depreciation.

JLR’s Free Cash Flow guidance has also been lowered from £1.8 billion to £1.3 billion, reflecting these challenges. UBS flagged concerns that JLR's maintained margin guidance is dependent on stable demand, amid warnings from other global OEMs.

Looking ahead, Tata Motors aims to drive growth in its passenger vehicle sales through recent model launches and focused marketing. Of the 36 analysts covering Tata Motors, 22 rate it a "buy," nine recommend "hold," and five suggest "sell."