Tata Motors Shares Drop 8% After Q3 Earnings—Analysts React
Tata Motors‘ stock took a hit on Thursday morning, sliding 8% after the company released its Q3 FY25 earnings post-market hours on Wednesday. While the Jaguar Land Rover (JLR) segment delivered solid results, the overall performance was weighed down by margin pressures.
Tata Motors Q3 Earnings Overview
The automaker reported a 22.5% drop in consolidated net profit, coming in at ₹5,578 crore compared to ₹7,415 crore in the same period last year. Despite this YoY decline, the profit showed a 62% sequential improvement from the ₹3,450 crore recorded in Q2 FY25.
Analyst Reactions to Tata Motors Q3 Results
Jefferies Downgrades Tata Motors
For the first time in 3.5 years, Jefferies downgraded Tata Motors from a ‘Buy’ to ‘Underperform’ rating. The firm cited multiple concerns:
- Q3 EBITDA dropped 16% YoY, missing Jefferies’ estimate of a 19% decline.
- JLR is facing weak demand in China and Europe, alongside rising customer acquisition and warranty costs.
- India’s commercial (CV) and passenger vehicle (PV) demand is slowing, while competition in the EV market is intensifying.
While Q4 is expected to be seasonally stronger, Jefferies cut its FY25-27 EBITDA estimates by 7-11% and EPS forecasts by 5-10%. The brokerage also slashed its price target to ₹660, preferring M&M, EIM, and TVS Motors in the auto sector instead.
Motilal Oswal Maintains ‘Neutral’ Rating
Motilal Oswal Financial Services (MOFSL) kept its ‘Neutral’ rating on Tata Motors, citing challenges in meeting its Q4 FY25 10.2% EBIT margin target. The brokerage expects margin pressure at JLR to continue over the next few years due to:
- Weak demand in key global markets.
- Higher costs as the company increases investments in marketing.
- EV ramp-up, which may initially weigh on profitability.
Even in India, both CV and PV businesses are seeing a slowdown. In light of these challenges, MOFSL trimmed Tata Motors’ EBITDA estimates by 3% and 5% for FY25 and FY26 and maintained a target price of ₹755 for December 2026.
ICICI Securities Upgrades Tata Motors
Taking a more optimistic stance, ICICI Securities upgraded Tata Motors from ‘Sell’ to ‘Add’, seeing potential for improvement in both the JLR and domestic businesses.
- Tata Motors’ consolidated EBITDA margin stood at 11.5%, missing the 12.9% consensus estimate.
- JLR’s EBITDA margin came in at 14.2%, and the company maintained its FY25 EBITM target of 8.5%.
- JLR aims to be net cash positive and expects a strong Q4 performance, though demand in China remains a concern.
ICICI Securities believes that with JLR’s supply chain stabilizing and volumes recovering, EBITDA margins could improve to 16-17% by FY26-27. Additionally, Tata Motors’ domestic CV business is expected to benefit from government infrastructure spending, while the PV segment should see growth due to upcoming new model launches.
With this outlook, ICICI raised its target price to ₹831 (from ₹923), adjusting for a more conservative valuation approach.
Final Takeaway
Tata Motors’ latest earnings report has sparked mixed reactions from analysts. While Jefferies has turned bearish due to global demand concerns and rising costs, ICICI sees long-term recovery potential, particularly in JLR and the domestic business. For now, investor sentiment remains cautious as the company navigates macroeconomic challenges and increasing competition in the EV space.