Why Tata Motors Shares Are Tanking 4% Even Though Q1 Profit Beat Estimates

Tata Motors‘ share price tanked on Friday morning even as the company’s June quarter earnings were mostly inline with street estimates.

What Happened: The Tata Group company reported a net profit of ₹5,566 crore for the quarter, a 73% increase from ₹3,203 crore in the same period last year. Revenue for the quarter stood at ₹1.08 lakh crore, marking a 6% rise from ₹1.02 lakh crore reported in the corresponding quarter of the previous year.

While the revenue figures were largely in line with street estimates, the profit exceeded expectations. Analysts had projected revenue at ₹1.08 lakh crore and net profit at ₹5,061 crore.

However, the company's net automotive debt increased to ₹18,600 crore, up 16% from ₹16,000 crore at the end of March 2024. Additionally, Jaguar Land Rover’s net debt rose to ₹10,500 crore, up from ₹7,700 crore at the end of the March quarter.

Brokerage Reactions: Jefferies reiterated its “buy” call on the stock and raised its target price to ₹1,330. In the first quarter, EBITDA grew by 14% year-on-year, which was 5% above estimates. The company’s domestic commercial vehicle segment’s EBITDA performed better than expected, Jaguar Land Rover was in line with projections, though the India passenger vehicle segment lagged.

Nomura also issued a “buy” call, setting a target price of ₹1,303 per share. The analysts describe JLR’s performance as a “luxury ride”, continuing to do well despite tough market conditions. Q1 margins were in line with expectations, and the medium and heavy commercial vehicles segment may see an uptick with increased infrastructure spending, it said.

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JPMorgan also maintained its “overweight” rating raising the target price to ₹1,250 from ₹1,115. The brokerage highlighted JLR’s strong performance in Q1 and noted that India’s passenger vehicle segment needs to improve in the second half of the year ending March 2025. For Jaguar Land Rover, volume, mix, and commodity benefits have offset higher incentives, it added.

UBS has maintained a “sell” rating on Tata Motors but has slightly increased the target price to ₹825 from ₹800. The brokerage notes that Jaguar Land Rover has shown positive EBIT, but the outlook for its order book is negative. In India, the commercial vehicle segment’s margin and outlook are strong; however, passenger vehicle margins continue to disappoint, the global research firm said.

Nuvama also maintained its “reduce” rating for the stock with a target price of ₹1,010. The brokerage house said that the results were mostly in line with its estimates. The analysts also highlighted that Jaguar Land Rover’s order book decreased to 1.04 lakh units from 1.33 lakh units at the end of March. This reduction in the order book, combined with a high base effect, is expected to drive a moderation in growth going forward.

ICICI Securities downgraded the stock’s rating to “sell” from “reduce” with a target price of ₹925.

Price Action: Tata Motors’ share price was down 3.95% to trade at ₹1,099.25 as the markets opened on Friday.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.