Earnings Outlook
Discounts, operational issues may drag Tata Motors margins
This story was originally published at 22:59 IST on 27 January 2025
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By Narayana Krishna
HYDERABAD - Sluggishness across business segments and discounts are likely to impact Tata Motors Ltd's consolidated earnings for the December quarter, according to analysts. Sales growth in the passenger vehicle segment and Jaguar Land Rover may help the company to report an overall sales growth for the quarter, while weak operating performance is likely to drag the net profit on a year-on-year basis, analysts said.
Tata Motors is expected to report an 11% year-on-year fall in its Oct-Dec net profit to INR 62.9 billion while its top line is expected to rise 5% on year to INR 1.2 trillion, according to an average of estimates by 12 brokerage houses.
The highest projection for the bottom line is INR 76.7 billion by Nuvama Wealth Management Ltd. and the lowest is INR 50.7 billion by JM Financial Institutional Securities Ltd. Among the estimates, the highest projection for revenue is INR 1.2 trillion by InCred Research Services Pvt Ltd. and the lowest is INR 1.1 trillion by JM Financial.
Sequentially, Tata Motors net profit is seen rising 88% due to lower base, while revenue is seen growing 15% aided by passenger vehicles and JLR volumes, the estimates show. Tata Motors is scheduled to announce its December quarter earnings on Wednesday.
According to Prabhudas Lilladher Pvt Ltd., Tata Motors' December quarter top line is expected to grow by 4.3% year on year, primarily driven by a decent volume growth in its JLR business. However, discounting and operating-level concerns may limit significant expansion in earnings before interest, tax, depreciation and amortisation--EBITDA--margins. Consequently, sluggishness across businesses is likely to result in a 2% year-on-year decline in profit after tax, the brokerage said.
Motilal Oswal Financial Services Ltd. said domestic passenger vehicle and commercial vehicle volumes for Tata Motors remained largely flat year-on-year in the December quarter. While commercial vehicle segment's EBITDA margin is expected to improve by 50 basis points on year, the passenger segment's margin is likely to remain stable from the previous year, Motilal Oswal said. JLR volumes are also projected to remain flat year on year, the brokerage said.
MARGIN PRESSURE
Most analysts projected Tata Motors' EBITDA margins to come under pressure on a year-on-year basis due to discounts and operational issues. According to Motilal Oswal, rising discounts are likely to weigh on the company's profitability, with the EBITDA margin expected to contract by 270 basis points on year. Considering the sustained margin pressures, particularly in the JLR business, the brokerage has revised its 2025-26 (Apr-Mar) earnings per share estimate downward by 5.5%.
KR Choksey Research in its note projected that the EBITDA margin is likely to decrease by 52 bps on year, driven by negative operating leverage and an unfavourable product mix. However, on a sequential basis, the margin is to go up by 178 bps due to positive operating leverage, the brokerage said.
According to an average of estimates by 11 brokerages, Tata Motors Oct-Dec EBITDA is pegged at INR 159.3 billion. Analysts are watching for JLR's demand outlook and levers for margins improvement.
Following are the Oct-Dec earnings estimates for Tata Motors Ltd. based on reports from 12 brokerage firms in the descending order by the estimate of net profit:
|
Brokerage name |
Net Sales |
Net Profit |
EBITDA |
|
-------(In INR million)------- |
|||
|
Nuvama Wealth Management Ltd |
11,76,159.00 |
76,698.00 |
1,71,324.00 |
|
Prabhudas Lilladher Pvt Ltd |
11,52,959.00 |
68,886.00 |
1,65,399.00 |
|
Emkay Global Financial Services Ltd |
12,12,873.00 |
67,252.00 |
1,52,822.00 |
|
KR Choksey Research |
11,94,555.00 |
67,140.00 |
1,59,482.00 |
|
Sharekhan Ltd |
11,33,420.00 |
66,770.00 |
-- |
|
Motilal Oswal Financial Services Ltd |
11,49,697.00 |
65,531.00 |
1,47,472.00 |
|
Nomura Equity Research |
11,83,402.00 |
61,139.00 |
1,57,641.00 |
|
HSBC Global Research |
11,79,061.00 |
60,408.00 |
1,63,376.00 |
|
Elara Securities (India) Pvt Ltd |
11,49,772.00 |
59,410.00 |
1,49,054.00 |
|
Incred Research Services Pvt Ltd |
12,15,151.00 |
57,041.00 |
1,74,000.00 |
|
Kotak Institutional Equities |
11,22,487.00 |
53,399.00 |
1,40,555.00 |
|
JM Financial Institutional Securities Pvt Ltd |
10,97,255.00 |
50,731.00 |
1,70,835.00 |
|
Average |
11,63,899.25 |
62,867.08 |
1,59,269.09 |
At 1457 IST, shares of Tata Motors Ltd were trading at INR 711.50 on the National Stock Exchange, down 3.1% from its previous close. End
US$1 = INR 86.34
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Akul Nishant Akhoury
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