Tata Motors shares jumped as much as 6% to their day's high of ₹485 on Thursday after reporting exceptional Q1 FY27 results. The company delivered net profit of ₹2,560 crore, representing a surge of 83.3% year-on-year from ₹1,397 crore in the same period last year. According to The Economic Times, revenue from operations came in at ₹20,667 crore, up 19% from ₹17,324 crore in the corresponding quarter of the previous financial year. EBITDA rose to ₹2,300 crore, up 10% year-on-year, though EBITDA margin stood at 10.9%, down 90 basis points due to commodity inflation pressures. The company attributed most of the margin decline to commodity inflation with a negative impact of 340 basis points YoY, which was partly offset by operating leverage and price hikes contributing 140 basis points positively.
A sharp divergence has emerged in brokerage views on Tata Motors' business segments following their Q1 FY27 earnings. While analysts turned increasingly bullish on Tata Motors Commercial Vehicles (TMCV) amid strong earnings, market share gains and export-led growth prospects, sentiment remained mixed on Tata Motors Passenger Vehicles (TMPV) due to margin pressures in the domestic PV business and continued concerns over Jaguar Land Rover's (JLR) cash burn and rising debt. Motilal Oswal Financial Services (MOSL) maintained a Neutral rating on TMCV with a target price of ₹434, noting that TMCV's Q1 FY27 profit after tax came in at ₹16 billion, surpassing its estimate of ₹13.5 billion, driven by higher-than-expected margins and stronger other income. The brokerage also reported 27% year-on-year volume growth to 1,08,000 units during the quarter.
Nuvama has reiterated its Buy rating on TMCV with a target price of ₹525, raising its FY28 EBITDA estimate by 10% factoring in higher revenue assumptions, primarily driven by exports. The brokerage noted that replacement demand is recovering after two years of deferral, supported by improved affordability following GST cuts and adequate availability of financing. Nomura has upgraded TMCV to 'Buy' from its earlier rating and raised the target price to ₹554 from ₹402, with the brokerage expecting margins to improve further with the benefit of price hikes. CLSA noted that TMCV's Q1 EBITDA margin of 11.3%, down 76 basis points YoY, was around 50 basis points above consensus. The company reported standalone profit of ₹1,528 crore for Q1 FY27, up 8.3% year-on-year from ₹1,411 crore, with revenue rising 23.3% to ₹19,329 crore.
Motilal Oswal Financial Services maintained its 'Sell' rating on TMPV with a target price of ₹310, citing margins in the India passenger vehicle business remained disappointing despite strong volume growth, while Jaguar Land Rover's cash burn continues to be a key concern. JM Financial has an 'Add' rating on the stock with a target price of ₹375, revising domestic PV business volume growth to 16.5% for FY27 compared to 12.3% earlier, factoring in Q1FY27 performance. However, JM Financial is adjusting the FY27 operating profit margin for the India business to 6.8% from 8.3% earlier due to raw material inflation pressures. Nuvama maintained its 'Buy' rating on TMPV, revising its target price to ₹450 from ₹470, noting that JLR reported EBITDA of £481 million, down 22% YoY, supported by better gross margins. In contrast, India PV EBITDA stood at ₹7.6 billion, up 74% YoY, but fell short of estimates due to higher staff and other expenses, despite a 66% YoY jump in revenue to ₹182.9 billion. The passenger vehicle segment reported revenue increased 9.27% YoY to ₹95,799 units, but profit declined 80.25% YoY to ₹775 crore.
Raw material inflation emerged as a key challenge for Tata Motors, with raw material inflation having a 4.5% impact on margins in Q1 and expected to impact Q2FY27 profitability by another 3.5%. According to Business Standard, the company is trying to offset this through cost reductions, value analysis/value engineering and IPL cost normalisation. This is expected to offset the incremental raw material inflation, resulting in flat margins on a sequential basis in Q2FY27. For JLR, temporary supply chain constraints due to a fire at a component supplier, the Middle East disruption due to the West Asia conflict, and the planned winding down of legacy Jaguar models ahead of new launches led to a 9.2% YoY decline and 16.8% Q-o-Q fall in wholesale volumes. JLR's Ebit margins were lower by 110 basis points YoY and 640 basis points sequentially to 2.8%, impacted by negative operating leverage and higher variable marketing expenses.
