Broker’s call: Tata Motors (Outperform)

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Target: ₹1,200

CMP: ₹964.70

Tata Motor’s Q4-FY24 results were largely in line, with JLR meeting its guidance. After a solid JLR turnaround achieved in FY24, management’s guidance of flat y-o-y EBIT margin in FY25 suggests that FY25 will be a year of consolidation.

While we were expecting a gradual margin expansion in FY25, eventually reaching the target of 10 per cent by FY26, FY25 now seems to be a year of consolidation. That said, despite a 200bp rise in variable marketing expenditure (VME) over the last three quarters, JLR was able to raise EBIT margin further, giving credence to the turnaround and its ability to reach 10 per cent EBIT margin. TTMT has increased investments in JLR (GBP3.5b in FY25, vs GBP3.2b in FY24) as it gets closer to the roll out of electrified Land Rover and Jaguar models.

While the CV business outlook is mixed, model launch plans in the PV business and improving profitability of the EV business, despite the launch of lower-priced models, is encouraging. The company is also growing its revenue share from the non-vehicle business.

The stock, after having doubled over the last year, still trades at an FCF yield of 8 per cent and looks attractive to us.