From ₹400 to ₹950: Tata Motors surges 137% in 11 months; hits record high post Q3

Shares of Tata Motors gained 8% in early trade on Monday to hit a fresh record high of ₹950 apiece on the NSE after the auto major reported strong earnings in a seasonally weak quarter ended December 31, 2023. Tata Motors has been the top Nifty 50 performer in the last year, zooming 137% from its 52-week low of ₹400.4 touched on March 28, 2023.

Early today, Tata Motors shares opened higher for the second consecutive session at ₹934, up 6.3% against Friday’s closing price of ₹878.75 on the NSE. In the first two hours of trade so far, the auto heavyweight gained as much as 8.1% to ₹950, while the market capitalisation climbed to ₹3.13 lakh crore. The auto stock has risen 19% in a month; 54% in six months; and 113% in the last year. In comparison, the Nifty50 climbed 1% in a month; nearly 12% in six months; and over 23% in a year.

Tata Motors shares got a boost today after the auto major reported better than expected results in Q3 FY24, driven by robust India business and improvement in the performance of Jaguar Land Rover (JLR), while easing raw material costs and price hikes boosted profit margins.

The Mumbai-headquartered company posted a 137.5% growth in consolidated net profit at ₹7,025.11 crore in Q3 FY24, against ₹2,958 crore in the year-ago period. The consolidated revenue increased 25% to ₹1.11 lakh crore against ₹88,489 crore in the same period last year. As per market estimates, the auto major was expected to post a profit of ₹4,547 crore in Q3 FY24 and revenue at ₹1.08 lakh crore.

On the operating front, EBITDA for the October-December quarter stood at ₹15,333 crore, up 42.5%, while operating margin improved by 171 basis points to 13.94%.

During the quarter under review, Tata Motors’ U.K. subsidiary JLR rose to ₹76,665 crore against ₹58,863 crore in the December 2022 period, led by a favourable model mix. The company “delivered its best quarterly profit for seven years and highest ever revenue for the first nine months of a financial year”, says Adrian Mardell, JLR chief executive officer. EBIT margin was positive at 8.8%, more than doubling from 3.7% a year ago. 

Post Q3, JM Financial has maintained a ‘BUY’ call with a target price of ₹1,000, saying that improving margins for both domestic passenger vehicle (PV) and commercial vehicle (CV) segments augurs well for overall profitability. The slowdown in key global markets remains monitorable, it says.  

Tata Motors' commercial vehicles arm’s (Tata CV) domestic wholesale CV volumes were 91,900 units, marginally up at 1.1% YoY. Looking ahead, the CV unit expects demand to improve in Q4FY24 on the government’s thrust on infra development, promising growth outlook of the economy and its demand-pull initiatives.

The brokerage in its report says that normalisation of component supplies helped JLR lower order backlog to 148k units, versus 168k units at the end of September quarter of FY24. EBITDA margin stood at 16.2%, improved by 430 bps YoY and 130 bps QoQ, led by higher operating leverage and lower semiconductor costs partially offset by higher fixed marketing, admin cost and foreign currency revaluation.

“Tata Motors highlighted that supply constraints have largely normalised and the company remains on track to achieve its FY24 production guidance of 400k+ units, versus 321k units in FY23. The demand environment in the U.S. continues to remain robust. The EU market remains steady and the company remains watchful of any slowdown going ahead,” the report notes.