Tata Motors shares surge 4.5% after strong Q2 profit

Shares of Tata Motors surged 4.5% in the opening trade today after the company reported consolidated net profit of ₹3,764 crore in Q2 FY24 compared with a loss of ₹945 crore in the year-ago period. Shares of Tata Motors with differential voting rights (DVR), A-ordinary shares, hit 4% to surge to a one-year high at ₹449.65 on the BSE.

Tata Motors shares opened a gap up at ₹661 and surged to an intra-day high of ₹665.45. At the current share price, the m-cap of the company stands at ₹2,17,596.96 crore. Tata Motors Ltd - DVR opened the gap up at ₹449.20 and surged to an intra-day high of ₹449.65.

Tata Motors shares have seen a 56.95% rise in the past year and a 65.48% surge in the year-to-date period. In the six months and one-month, the shares rose 35.02% and 5.27%, respectively.

Analysts expect strong performance to continue at Tata Motors on a faster ramp-up in volumes across segments in H2 vs H1, and guidance upgrade at JLR being higher than expected. Himanshu K Singh, research analyst, Prabhudas Lilladher, has given a 'buy' call on the share with the current market price of ₹636 and profit booking at ₹785.

"We increase our FY24/25/26E EBITDA estimates by 7%/4%/4%, to factor in the company’s updated margin guidance and 2Q performance. Tata Motors’ (TTMT) consol. revenue was below our and consensus estimates (by c3%), led by lower realization across JLR, CV and PV segments. However, margin beat at CV and PV helped report in line with absolute EBITDA. JLR has increased its FY24 EBIT margin guidance from >6% to ~8% (higher than expected)," says Singh.

Tata Motors revenue from operations jumped 32% year-on-year to ₹1.05 lakh crore in the second quarter as against ₹79,611 crore in the corresponding quarter last year. Earnings before interest, taxes, depreciation, and amortisation stood at ₹14,400 crore, up by 86.4% from ₹5,571 crore a year ago. EBIT margin improved 510 basis points (bps) to 7.5% in Q2.

Tata Motors’ subsidiary JLR revenues improved by 30.4% to 6.9 billion pounds. Strong JLR wholesales and improved mix resulted in EBIT margins of 7.3%, up 630 basis points, the carmaker says. CV revenues improved by 22.3% benefiting from higher realisations, a richer mix and favourable commodity prices, it says.

PV revenues were marginally down 3% impacted by the transition to the new launches while EBIT margins improved by 140 basis points to 1.8% due to savings in commodity costs. Tata Motors says it remains optimistic on demand despite external challenges and anticipates a moderate inflationary environment.

JLR’s order book remained strong with over 168,000 client orders, with Range Rover, RR Sport and Defender accounting for 77% of the order book. The carmaker plans to invest 15 billion over five years to transition to electric vehicles. Tata Motors increased JLR’s margin guidance from 6% to 8% for FY24.

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