Tata Motors shares fall 5% after Q1 show; Check reasons, new target prices

The board of the company approved the demerger of the Tata Motors into two separate listed companies. The company revealed that the demerger will conclude in the next 12 to 15 months.

Tata Motors in focus post Q1: Tata Motors' results for the June quarter (Q1FY25) came in-lline with market expectations, prompting several brokerages to raise their target price for the company.
The automaker’s consolidated net profit rose 74 per cent year-on-year (Y-o-Y) to Rs 5,566 crore in the June quarter of financial year 2025 (Q1FY25), from Rs 3,203 crore in the June quarter of financial year 2024 (Q1FY24).

The top-line or revenue jumped 6 per cent Y-o-Y to Rs 1.08 trillion in Q1FY25, from Rs 1.02 trillion in Q1FY24.

Earnings before interest, tax, depreciation and amortisation (Ebitda) rose 19 per cent to Rs 15,785 crore in Q1FY25, from Rs 13,217 crore in Q1FY24. Consequently, Ebitda margin rose 170 basis points (bps) Y-o-Y to 14.6 per cent in Q1FY25. Tata Motors also reported a tax expense of Rs 3,178 crore in Q1FY25.

Apart from that, Tata Motors JLR division’s revenue also soared 5.4 per cent Y-o-Y to £7.3 billion. Its Ebitda margin, however, slipped 50 bps to 15.8 per cent while Ebit margin rose 30 bps Y-o-Y to 8.9 per cent.

Furthermore, the board approved the demerger of the company into two separate listed companies. The company revealed that the demerger will conclude in the next 12 to 15 months.

On the bourses, the Tata Motors stock fell as much as 4.76 per cent to hit an intraday low of Rs 1,090.05 per share. At 9:40 AM, the stock was the top loser on BSE.  

Notably, the stock has rallied over 15 per cent in the last one month while it has zoomed 32 per cent in the last six months, BSE data shows.

Given these developments, here’s what brokerages said about TaMo’s Q1FY25 results.

Nomura
 

Nomura analysts are optimistic about Tata Motors' prospects, highlighting that JLR's shift towards a luxury focus will enhance both average selling prices (ASP) and margins, thanks to a better product mix and premium positioning. 

They project Ebit margins of 8.5 per cent for FY25, 8.5 per cent for FY26, and 10 per cent for FY27. As margins improve, the potential for stock re-rating is high, given the robust free cash flow (FCF) yields of 10-15 per cent, even at their target valuation.

On valuation front, Nomura values commercial vehicles (CVs) at 11x EV/Ebitda, passenger vehicles (PVs) at 1.5x EV/sales, and JLR at 3.5x EV/Ebitda for FY26-27. With the stock currently trading at 5.9x FY26 EV/Ebitda, they estimate Tata Motors will transition from a net debt position of Rs 18,600 crore (~Rs 50 per share) in Q1 to a net cash position of Rs 145 per share by FY27. However, they note downside risks including weak demand in China and Europe, increased incentives, and a potential CV downcycle. 

Consequently, Nomura has raised the target price to Rs 1,303, reflecting a 13.9 per cent upside, and maintained a ‘Buy’ rating.

Emkay
 

Analysts at Emkay report that Tata Motors' Q1 performance was in line with expectations. India’s CVs exceeded forecasts, and JLR posted a positive Ebit surprise due to lower depreciation, although Ebitda was in line with expectations. 

They anticipate near-term production issues at JLR for Q2/Q3 but maintain guidance for Ebit above 8.5 per cent and a net cash balance sheet. Domestic demand is expected to gradually improve, with commodity prices staying stable.

Analysts further see India CVs as a bright spot, with an industry upcycle expected from FY26, while the global outlook remains muted. The Indian PV segment is anticipated to outperform, especially with the launch of a new mid-size SUV. 

Emkay’s FY25/26 estimates remain unchanged, and they have introduced FY27 estimates with an 8 per cent Ebitda CAGR for FY24-27. They have revised their target price up to Rs 1,175 from Rs 1,050, reflecting a higher multiple for India CVs, and maintained an ‘Add’ rating.

Nuvama

Those at Nuvama indicate that Tata Motors' Q1FY25 results were largely as expected. They note a reduction in JLR’s order book to 104,000 units from 133,000 in March 2024, which could lead to moderated growth due to order book exhaustion and a high base. 

A muted performance in India CVs is attributed to a shift in market share to railways, a slowdown in infrastructure spending, and a high base effect. However, new launches are expected to benefit the PV division, analysts said.

Nuvama projects a revenue/Ebitda CAGR of 6 per cent/7 per cent over FY24-27, down from the previous 21 per cent/25 per cent over FY21-24. They retain a ‘Reduce’ rating with a revised target price of Rs 1,010, up from Rs 960, due to a reduction in shares from the cancellation of differential voting rights shares.

According to reports, JP Morgan has maintained an Overweight rating on Tata Motors, raising their target price to Rs 1,250 per share. Jefferies has also kept an Overweight rating, increasing their target price to Rs 1,330 per share.