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Tata Motors' Stock Gains Momentum as JLR Exceeds Expectations in Q2 FY24

  • Posted on October 6, 2023
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Shares of Tata Motors are poised for a significant trading day on Friday, October 6, driven by the impressive performance of Jaguar Land Rover (JLR) in the second quarter of fiscal year 2024 (Q2FY24). The British subsidiary of Tata Motors, JLR, has outperformed market expectations, sparking investor interest in Tata Motors.

Tata Motors' Stock Gains Momentum as JLR Exceeds Expectations in Q2 FY24

Source: https://www.imeche.org/

Shares of Tata Motors are poised for a significant trading day on Friday, October 6, driven by the impressive performance of Jaguar Land Rover (JLR) in the second quarter of fiscal year 2024 (Q2FY24). The British subsidiary of Tata Motors, JLR, has outperformed market expectations, sparking investor interest in Tata Motors.

Prominent global brokerage firms Nomura and Morgan Stanley have reaffirmed their positions on Tata Motors. Nomura has bestowed a 'Buy' rating upon Tata Motors, setting a robust target price of Rs 786 per share, which suggests an impressive upside potential of up to 27%. Their optimism stems from the belief that JLR is making a strong recovery in the second half of FY24, aligning closely with their estimates of 4.06 lakh units, excluding China JV, for the fiscal year.

Morgan Stanley, on the other hand, maintains an 'Overweight' rating for the stock with a target price of Rs 711 per share. Their analysis highlights the likelihood of strong margins in Q2 and an upside risk to the FY24 EBIT margin estimate of 6.6%. Moreover, they see Tata Motors as a promising de-leveraging opportunity in the current financial year and as a significant player in the Indian EV market in FY25.

JLR's Q2 business update reveals a remarkable increase in sales volumes, with wholesale volumes reaching 96,817 cars, marking a substantial 29% increase from the previous year. Retail sales have also surged to 106,561 units, reflecting a notable 21% growth compared to the same quarter last year. These improvements are not limited to a specific region, as retail volumes have risen across the board - Overseas up 56%, North America up 32%, Europe up 16%, the UK up 9%, and China up 7%.

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JLR's order book remains robust, with 1.68 lakh units at the close of the September quarter. The Range Rover, Range Rover Sport, and Defender models continue to drive demand, constituting a significant 77% of the order book. Additionally, JLR anticipates a positive free cash flow of approximately £300 million in the second quarter of this fiscal year, based on preliminary cash balances.

While JLR did not provide a specific breakdown between Jaguar and LR wholesale figures, the higher-than-expected wholesales, despite a two-week summer shutdown, indicate an easing of supply-side constraints. This promising performance by JLR is expected to have a substantial impact on Tata Motors' stock price, which is poised for an upward trajectory in the near future.

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