Jefferies has downgraded its outlook on Tata Motors, maintaining an ‘Underperform’ rating and a target price of ₹630, citing a challenging year ahead for the company, especially for Jaguar Land Rover (JLR) and India’s passenger electric vehicle (EV) segment.
The brokerage flagged concerns despite a 30% year-on-year rise in pre-exceptional profit before tax (PBT) in Q4FY25, driven by lower depreciation and interest costs. The bottom-line beat, however, masked broader pressure on operating metrics and the uncertain global outlook.
Mixed operational performance in Q4FY25
Tata Motors reported consolidated revenue of ₹1.19 lakh crore in Q4, marginally down from ₹1.20 lakh crore a year earlier. EBITDA came in at ₹16,992 crore, nearly flat YoY but around 4% ahead of Jefferies’ estimates. However, on a YoY basis, consolidated EBITDA declined 2%, with softness in JLR margins being the primary drag.
JLR posted an EBITDA margin of 15.3%, a decline from 16.3% a year ago, and just slightly above the street’s 15.2% consensus. EBIT margin for JLR in Q4 was 10.7%, with FY25 closing at 8.5% — at the lower end of the guidance range.
Despite this, Tata Motors’ pre-exceptional PBT jumped 30% YoY, aided by a sharp decline in depreciation and interest outgo — a result of improving balance sheet health and debt reduction.
Headwinds mount: JLR tariffs, China risk, and EV wars
Jefferies warned that JLR could face a turbulent FY26, largely due to the possibility of new US tariffs on imported EVs and luxury cars, alongside macroeconomic challenges and intensifying competition in China. Additionally, rising customer acquisition costs could weigh on margins and limit volume growth.
The brokerage also highlighted that JLR’s guidance for FY26 remains conservative, in contrast to the optimism seen in prior quarters. While demand in Europe remains healthy and UK trends are improving, Jefferies believes external risks may outweigh internal improvements.
Domestic CV and PV landscape softening
In India, the CV segment offered some cushion, with only a 0.5% decline in revenue versus a 5–6% expected drop. However, Jefferies pointed to signs of slowing demand and increasing competitive intensity. For PVs, the revenue decline of 13% was steeper than anticipated, as the EV segment struggles with a proliferation of new entrants and softer-than-expected consumer uptake.
Reflecting this cautious outlook, Jefferies has cut its FY26–27 EBITDA estimates by 8%, though raised earnings per share (EPS) forecasts by 3–4% to account for lower interest and depreciation costs.
Valuation reset amid structural risks
At a time when Tata Motors is transitioning into a diversified mobility player with electric and luxury offerings, Jefferies’ stance suggests that investors must weigh structural potential against cyclical risks.
“Valuations remain vulnerable to demand-side shocks and regulatory changes, especially in overseas markets,” Jefferies stated, justifying its lower target price and bearish view.
Disclaimer: This article is based on the brokerage report by Jefferies. It does not constitute investment advice. Investors are advised to consult their financial advisors before making any investment decisions.
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