Tata Motors Stock Falls 3% Despite Nomura, Morgan Stanley's Positive Jlr Outlook

Tata Motors stock falls 3% despite Nomura, Morgan Stanley’s positive JLR outlook

Tata Motors Shares React to JLR’s Mixed Performance

Shares of Tata Motors slipped 3 percent to ₹769 in early trade on January 9, reversing their two-day losing streak. This movement followed Jaguar Land Rover’s (JLR) Q3FY25 sales update, which showed a mixed performance. Despite the dip, brokerage firms Nomura and Morgan Stanley issued optimistic projections, buoying investor sentiment.

JLR, Tata Motors’ British subsidiary, posted wholesale volumes of 1,04,427 units, marking a modest 3 percent year-on-year (YoY) growth. However, retail sales saw a decline of 3 percent to 1,06,334 units. These numbers indicate JLR’s ongoing recovery from past supply chain disruptions while grappling with weaker retail demand.


JLR’s Q3FY25 Sales: A Detailed Breakdown

A closer look at JLR’s wholesale sales reveals a 20 percent sequential growth from Q2FY25, driven by flagship models. Range Rover sales increased by 22 percent YoY, Range Rover Sport by 17 percent, and Defender by 13 percent. High-margin models accounted for 70 percent of wholesale volumes, signaling a stronger mix and higher profitability potential.

The regional growth was primarily fueled by North America and Europe, markets that exhibited robust demand despite global economic uncertainties.


Analysts’ Outlook: Nomura’s Positive Stance

Nomura maintained its “buy” rating on Tata Motors with a target price of ₹990, projecting an upside of 24.5 percent from the current levels. The brokerage highlighted that JLR’s regional growth and sequential improvement in wholesale volumes bode well for Tata Motors’ financial performance.

Nomura anticipates a positive free cash flow (FCF) of GBP 250 million for Q3FY25, supported by higher sales volumes and cost efficiencies. Looking ahead, it estimates Tata Motors will transition from a net debt position of ₹22,000 crore in Q2FY25 to achieving net cash status by FY27.

Nomura also believes that Tata Motors’ current valuation—4.2x FY27 EV/EBITDA—is attractive, given the company’s growth potential and improving financial metrics.


Morgan Stanley’s Balanced Perspective

Morgan Stanley assigned an “equal-weight” rating with a target price of ₹920 per share. The firm noted that JLR’s wholesale volumes exceeded its expectations by 2 percent. While higher incentives slightly impacted margins, Morgan Stanley expects favorable product mix and operating leverage to offset these pressures.

The brokerage projects JLR’s EBIT margin at 9.6 percent for Q3FY25, aligning with its annual guidance of 8.5 percent. It emphasized that the market will focus on JLR’s FY25-26 margin trajectory as a key indicator of future growth.


Tata Motors’ Recent Market Performance

Tata Motors’ stock has faced a turbulent journey over the past year, marked by significant volatility. After reaching a peak, the stock has witnessed a sharp decline of 33 percent, reflecting a combination of global economic uncertainties and sector-specific challenges. These factors include fluctuating demand in key markets, supply chain disruptions, and investor concerns about macroeconomic headwinds.

However, 2025 has brought a renewed sense of optimism for Tata Motors, as the stock has displayed signs of recovery. Year-to-date, the company’s share price has risen by 8 percent, suggesting that investors are beginning to regain confidence in its long-term growth story. This rebound can largely be attributed to positive developments at its subsidiary, Jaguar Land Rover (JLR), which continues to play a pivotal role in shaping Tata Motors’ overall performance.

The growth in JLR’s wholesale volumes, driven by high-margin flagship models such as the Range Rover, Range Rover Sport, and Defender, has reinforced the company’s operational resilience. These models accounted for 70 percent of total wholesale volumes in Q3FY25, reflecting an improved product mix and higher profitability potential.

Additionally, favorable broker calls from institutions like Nomura and Morgan Stanley have further bolstered sentiment around the stock. Nomura’s projection of a ₹990 target price, indicating a 24.5 percent upside, has highlighted Tata Motors’ strong fundamentals and improving financial health. Similarly, Morgan Stanley’s balanced outlook with a target price of ₹920 has reassured investors about the company’s ability to navigate near-term challenges.

The company’s focus on achieving financial discipline has also been a key driver of renewed investor interest. Efforts to transition from a net debt position to a potential net cash status by FY27 underscore Tata Motors’ commitment to strengthening its balance sheet and delivering sustainable value.


Conclusion

While Tata Motors’ recent share price dip reflects market apprehensions, analysts remain optimistic about the company’s growth trajectory. JLR’s improved wholesale performance and focus on high-margin models indicate a promising outlook. Brokerages like Nomura and Morgan Stanley expect Tata Motors to achieve stronger financial health and operational efficiency in the coming years.

Investors should monitor the company’s ability to navigate global economic challenges while maintaining its strategic focus on profitability and growth.

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