Tata Motors hits 52-week high ahead of Q4 results; soars 32% so far in CY23

Brokerage firms are expecting a strong recovery in Tata Motor's financials as supply-side issues are relaxing (for JLR) and commodity headwinds are easing (for PV and CV).

Shares of Tata Motors hit a fresh 52-week high of Rs 513, gaining 2 per cent on the BSE in Wednesday’s intra-day trade on expectation of strong earnings for January to March quarter (Q4FY24). Tata Group passenger cars & utility vehicles company is schedule to announce Q4 results on Friday, May 12.

Thus far in the calendar year 2023 (CY23), Tata Motors have outperformed the market by surging 32 per cent, as compared to 1 per cent rise in the S&P BSE Sensex.

Tata Motors is expected to report a healthy performance in Q4FY23 primarily tracking a recovery in wholesale volumes at Jaguar Land Rover (JLR). Total sales volume at Indian operations was at 2.52 lakh units, up 10.4 per cent quarter-on-quarter (QoQ) with JLR sales volume (including China JV) anticipated at 1.08 lakh units, up 16.6 per cent QoQ.
 

On a consolidated basis for Q4FY23, ICICI Securities expect Tata Motors to report net sales of Rs 1.06 trillion, up 20 per cent QoQ. EBITDA in Q4FY23 is expected at Rs 13,664 crore with corresponding EBITDA margins at 12.9 per cent. JLR’s EBITDA (earnings before interest, taxes, depreciation, and amortization) margins are expected at 13.5 per cent in Q4FY23. At the profit after tax (PAT) level, the brokerage firm expects the company to report profit of Rs 2,269 crore in Q4FY23.

On account of better-than-expected sales volume in Q4FY23, the brokerage firm Ventura Securities has improved their forecasted financials for Tata Motors. The consolidated revenue & EBITDA are expected to grow at a CAGR of 16.8 per cent to Rs 518,095 crore and 33.1 per cent to 73,361 crore respectively over FY22-26E, while the blended EBITDA margin is expected to improve by 577bps to 14.2 per cent. Net earnings are expected to scale to Rs 23,023 crore (compared to the loss of Rs 11,441 crore) and net margins to reach 4.4 per cent by FY26E, the brokerage firm said. It has ‘buy’ rating on Tata Motors with a target price of Rs 715 per share in next 30 months.

“We are expecting a strong recovery in Tata Motor’s financials as supply-side issues are relaxing (for JLR) and commodity headwinds are easing (for PV and CV). It could improve the margin profile of the company and enhance its FCF generation,” Ventura Securities said.

Meanwhile, last month, the global rating agency S&P Global Ratings raised Tata Motor’s long-term issuer and issue credit ratings from 'BB-' to 'BB' on earnings improvements, potential deleveraging, and a stable outlook.

Tata Motors's cash flow should strengthen over the next 12–18 months due to improving operating conditions in India and at its 100 per cent subsidiary, Jaguar Land Rover Automotive Plc.

Solid earnings and free operating cash flow (FOCF) will support debt reduction. The India-based company will be able to further reduce debt if it successfully lists its subsidiary, Tata Technologies Ltd, as planned, S&P added.

The stable outlook indicates that Tata Motors' cash flow and leverage will steadily improve over the next 12-18 months, with support from improved operational performances, especially at JLR, the rating agency said.