Tata Motors Stocks Analysis Emkay Global Reaffirms BUY rating with 950 Target

Tata Motors Stock Analysis: Emkay Global Reaffirms 'BUY' Rating with ₹950 Target

Introduction

Tata Motors (NSE: TATAMOTORS), one of India's leading automobile manufacturers, has seen mixed results in its Q3 FY25 earnings report. Despite some challenges, brokerage firm Emkay Global Financial remains bullish on the stock, maintaining a ‘BUY’ rating with a target price of ₹950. The report highlights both strengths and concerns, particularly in Jaguar Land Rover (JLR) performance, electric vehicle (EV) profitability, and the commercial vehicle (CV) outlook.

Q3 Performance: Below Expectations but Signs of Improvement

Tata Motors’ Q3 FY25 performance was slightly below market expectations due to a decline in average selling price (ASP) at JLR and standalone operations, coupled with a lower-than-expected margin expansion at JLR.

• JLR EBIT Margin: Increased by 244 bps QoQ to 14.2%, showing resilience but still trailing expectations.
• Consolidated EBIT Margin: Remained stable at 11.5%.
• FY25E JLR Revenue Guidance: Slightly reduced to £29 billion (from £30 billion earlier), mainly due to market challenges in China.
• Free Cash Flow (FCF) Guidance: Maintained at £1.3 billion, with a strong Q4 needed to meet targets.

Despite these challenges, Tata Motors remains confident in its ability to achieve strong Q4 results, driven by higher production levels and seasonal cash generation.

India Business: Positive Trends in CV and EV Segments

1. Commercial Vehicles (CVs)

• The outlook is improving as fleet utilization levels, freight rates, and financing conditions show positive momentum.
• However, a slower-than-expected pickup in government infrastructure and capital expenditure (capex) spending remains a concern.

2. Passenger Vehicles (PVs) and Electric Vehicles (EVs)

• Encouragingly, Tata’s India EV business turned EBITDA-positive, marking a significant milestone.
• The PLI (Production-Linked Incentive) scheme has helped improve profitability, with margins at 10% with PLI and 1.7% without PLI.
• The company expects further sequential improvement in both CVs and PVs in Q4.

JLR: Managing Global Demand Challenges with Profitability Focus

Jaguar Land Rover, the most crucial revenue driver for Tata Motors, continues to face global demand uncertainties, especially in China. However, the company is focused on improving profitability by:

• Optimizing product mix to prioritize high-margin vehicles.
• Maintaining an EBIT margin of ~8.5% in FY25E.
• Targeting a net-cash balance sheet and ~£1 billion free cash flow in FY25.

This strategy is expected to drive long-term financial stability, despite short-term volume challenges.

Financial Adjustments and Stock Valuation

Due to the Q3 margin miss, Emkay Global has trimmed its FY25 EPS estimates by ~2.5%. However, the brokerage firm continues to value Tata Motors based on a Sum-of-the-Parts (SoTP) approach, leading to an unchanged target price of ₹950.

The valuation reflects:

• Strong fundamentals in the CV and PV segments.
• JLR’s strategic shift towards profitability and cost optimization.
• The company's ability to generate healthy free cash flow (FCF).

Investment Outlook: Why Emkay Global Recommends 'BUY'

1. Improving India Business:
   • The CV segment is witnessing early signs of recovery.
   • The EV business turning EBITDA-positive is a major milestone.
2. JLR's Profitability Focus:
   • The company is prioritizing higher-margin products over volume growth.
   • FCF and net-cash targets remain intact.
3. Strong Q4 Expectations:
   • Seasonal factors and increased production should drive better margins and cash generation.
4. Long-Term Growth Prospects:
   • The company is well-positioned to benefit from the global EV transition and India’s growing automobile demand.

Conclusion

Despite near-term headwinds, Tata Motors continues to demonstrate resilience and adaptability. Emkay Global’s BUY rating with a ₹950 target price reflects confidence in the company’s strategic execution, improving India business, and JLR’s profitability focus. Investors looking for long-term value may consider Tata Motors as a strong bet in the auto sector.

Golden Opportunity Join Our Free Webinars & Start Earning 2000 to 10000 Rupees Per day

?? Stock Market Training

Learn **Intraday & Basket Investing** to earn ?2,000+ per day!

Register Now

?? AI Money-Making Training

Discover How To **Earn ?2,000 – ?10,000 daily** Using AI Tools like ChatGPT, Grok and Gemini !

Join Now

? Manifestation Secrets

Use **Ancient Indian Techniques** to Manifest Wealth & Success Effortlessly!

Register and Unlock Now

Disclaimer: The stock price targets and analysis presented are based on publicly available information from top brokerage firms and may change over time. Always consult with your financial advisor before making any investment decisions. The opinions expressed in this article are for informational purposes only and do not constitute financial advice.