CLSA has reiterated its ‘Outperform’ rating on Tata Motors with a target price of ₹805, citing strong margin execution across Jaguar Land Rover (JLR), commercial vehicles (CV), and passenger vehicles (PV) in Q4FY25, aided by operating leverage and government-linked incentives.
Tata Motors posted consolidated revenue of ₹1.19 lakh crore in Q4, marginally lower year-on-year, but broadly in line with expectations. EBITDA was flat at ₹16,992 crore, comfortably ahead of the Bloomberg consensus estimate of ₹16,539 crore, as margins held firm at 14.2%.
JLR margin lifts on volumes, despite FY26 caution
According to CLSA, JLR’s Q4 EBIT margin stood at 10.7%, up 160 basis points (bps) sequentially and 150 bps year-on-year. The brokerage attributed the improvement to operating leverage from a 7% quarter-on-quarter volume growth. While the EBITDA margin for JLR in Q4 was 15.3%, slightly below the previous year’s 16.3%, it matched the poll estimate of 15.2%.
The company ended FY25 with JLR EBIT margins at 8.5%, fulfilling its earlier guidance. Notably, the luxury carmaker was net cash positive to the tune of £0.3 billion and generated free cash flow (FCF) of £1.5 billion for the year.
However, CLSA cautioned that JLR has adopted a conservative stance heading into FY26 due to the possibility of US tariffs and varying macroeconomic dynamics across regions. Still, the brokerage believes the luxury vehicle segment may remain relatively insulated from broader market turbulence.
India businesses benefit from incentives and pricing
Tata Motors’ domestic commercial vehicle business posted an EBITDA margin of 12.2%, up 20 bps YoY, helped in part by the Production Linked Incentive (PLI) scheme. Revenue from this segment declined just 0.5%, outperforming market expectations of a 5–6% contraction.
India PV EBITDA margin improved to 7.9%, up 60 bps YoY, thanks to a better product mix and continued PLI accruals. This, despite a steeper-than-expected 13% fall in PV revenue.
CLSA highlighted the company’s ability to extract value from its domestic product portfolio while benefitting from policy support — an important lever amid softening retail demand, particularly in the EV segment.
Strategic positioning strong despite demand concerns
The brokerage believes Tata Motors is well positioned in terms of cost structure and product breadth. With JLR’s strong FCF generation and India’s structural reforms in motion, CLSA sees scope for margin resilience even in the face of global demand fluctuations.
“Tata Motors continues to gain from PLI incentives and product innovation. Its execution strength is evident across segments,” CLSA said in its note.
Disclaimer: This article is based on the brokerage report by CLSA. It does not constitute investment advice. Investors are advised to consult their financial advisors before making any investment decisions.
