According to reports from Motilal Oswal, Tata Motors Passenger Vehicles delivered a strong Q1 FY27 performance with adjusted PAT of ₹1,140 crore, significantly beating the estimated loss of ₹120 crore. However, Citi reports that the Q1 results came in well below estimates, with revenue rising 9.3% to ₹95,799 crore from ₹87,677 crore but EBITDA falling 17.2% to ₹6,326 crore from ₹7,639 crore. EBITDA margin compressed to 6.6% versus 8.7% in the previous year, while net profit fell 80.3% to ₹775 crore from ₹3,924 crore. This performance was primarily driven by better-than-expected performance from the Jaguar Land Rover (JLR) division, which helped offset challenges in the India passenger vehicle business.
As reported by Motilal Oswal, JLR volumes were impacted by temporary supply constraints, including a fire at a major component supplier at the start of the quarter, resulting in a 10% YoY decline. Citi notes that JLR revenue fell 9.6% YoY to £6 billion, with JLR EBITDA margin at 8.1% in Q1 and JLR EBIT margin at 2.8% versus 4% a year earlier. Despite these challenges, JLR margins performed better than expected, though they remained under pressure due to a sharp rise in VME cost. The brokerage noted that JLR has embarked on a major cost-reduction initiative, which is likely to only partially offset current headwinds. Further, JLR continues to face multiple headwinds, both on the demand and cost fronts, adding to the ongoing operational challenges.
According to Motilal Oswal, despite strong volume growth, the India business margins remained largely stable year-on-year, which was disappointing. Citi reports that India margins disappointed, creating near-term risks despite healthy underlying demand. The brokerage highlighted that while the India business has been gaining market share, margins remain under pressure given the adverse mix and rising input costs. This performance contributed to the overall mixed results for the quarter, with the company facing challenges in balancing volume growth with profitability in the domestic market.
According to Motilal Oswal, given the multiple headwinds ahead, the brokerage refrained from changing FY28 estimates materially at this stage. However, on account of the better-than-expected JLR performance in Q1, the firm raised its FY27 EPS estimate by 12%. Citi has now cut its target price to ₹305 from ₹320, marking its third reduction in three months after previous cuts from ₹345 to ₹330 in May and then to ₹320 in June. The brokerage maintains its Sell rating citing continued commodity-cost inflation and expects Q2 margin to be in line with Q1 due to continued increases in commodity costs. Macquarie maintained its Outperform rating at ₹381, viewing JLR as in line with muted expectations while remaining upbeat on domestic growth, though it flagged margin risks as a key concern. Citi's latest target cut follows reductions in May and June, with the brokerage first lowering its target from ₹345 to ₹330 in May, then to ₹320 in June, and now to ₹305 in August.
Despite the mixed quarterly results, Tata Motors expects commodity costs to remain elevated and is focused on revenue growth and cost reduction initiatives. JLR plans to launch four new battery electric vehicles in the coming months as part of its electrification strategy. Citi flagged geopolitical developments and luxury-segment trends as key monitorables going forward, while Macquarie noted that management's outlook for India remains positive given healthy underlying demand. The company's ability to navigate ongoing margin pressures across both India and JLR businesses will be crucial for future performance, with Citi maintaining its cautious stance while Macquarie remains more constructive on the domestic market prospects.
