 "Tata motors")
Shares of Tata Motors surged by 4.5 per cent to Rs 665.45 on the BSE in Friday’s intraday trade before giving up some of the gains. The stock ended at Rs 647.8, up 1.7 per cent.
The positive sentiment for the stock was on the back of robust September quarter (Q2FY24) performance. Consolidated net profit for the auto major came in at Rs 3,764 crore in the quarter as against a net loss of Rs 944 crore in the same period a year ago.
Meanwhile, shares of Tata Motors with differential voting rights (DVR) — also known as A-ordinary shares, hit a new high of Rs 449.65, up 4 per cent on the BSE in the intraday trade on Friday. The stock, which closed with gains of 2 per cent, surpassed its previous high of Rs 449 on October 20.
During the quarter, Tata Motors’ revenues from operations increased 32 per cent to Rs 1.05 trillion, up from the Rs 79,611 crore during the July-September period of 2022-23 (Q2FY23).
The company's earnings before interest, tax, depreciation, and amortisation (Ebitda) during Q2 was Rs 13,767 crore, up from the Rs 5,571 crore in the second quarter last financial year.
Ebitda margins came at 15.5 per cent, down 10 bps sequentially, but up 450 bps on a year-on-year (Y-o-Y) basis.
The firm is confident of delivering a stronger performance in the second half of the financial year (H2FY24), buoyed by a healthy order book at its subsidiary Jaguar Land Rover (JLR), strong demand for heavy trucks in commercial vehicles, and new-generation products in passenger vehicles.
At JLR, the broader guidance on cash flow remains unchanged with free cash flow (FCF) expected at over £2 billion in FY24 with net debt reducing to less than £1 billion by the end of FY24.
On the consolidated basis, Tata Motors’ automotive net debt declined by Rs 5,000 crore in H1FY24 from Rs 43,700 crore as of March ’23 to Rs 38,700 crore as of September 2023.
“In an interesting move, Tata Motors India will share its premium pure electric PV platform i.e., Avinya with JLR for its mid-sized SUVs. With guidance of robust profitability, FCF generation and consequent debt reduction at JLR for FY24E, and impending IPO of its subsidiary i.e., Tata Technologies, we remain positive on the stock,” ICICI Securities said in a note.
Tata Motors should witness a healthy recovery as supply-side issues ease (for JLR) and commodity headwinds stabilise (for the India business). It will benefit from the commercial vehicle (CV) uptrend and stable growth in passenger vehicles (PVs), company-specific volume/margin drivers, and a sharp improvement in FCF, as well as a reduction in net debt in both JLR and India businesses, said Motilal Oswal Financial Services.
Given the strong outlook on JLR as well as domestic business, Nuvama Research expects the company to deliver an annual revenue growth of 12 per cent in FY23-26.
Coupled with this, a better mix and cost control should boost operating profit growth by 30 per cent over this period. Further, a strong FCF will also help the company to reduce its debt to equity levels to 0.3 times by FY26 from 1.7 times in FY23.
Tata Motors remains one of Nuvama’s top picks on expectations of a sales cycle recovery, margin expansion and debt reduction.
