Tata Motors PV shares drop 6% after Q2 net loss, JLR guidance cut; Brokerages bearish

Shares of Tata Motors Passenger Vehicles Ltd. (TMPVL) fell as much as 6% on Monday, November 17, as the company reacted to its September quarter results that were reported after market hours on Friday.

The highlight of TMPVL's quarterly result, the first after its demerger, was the cut to Jaguar Land Rover (JLR), its luxury car unit's EBIT margin guidance to just 0% to 2% from 5% to 7% earlier. From near zero, JLR now sees negative free cash flow of up to £2.5 billion.

On an adjusted basis, Tata Motors PV reported a net loss of ₹6,370 crore at the end of the September quarter, compared to a net profit of ₹3,056 crore during the same quarter last year. There was an impact of ₹2,008 crore due to the JLR cyberattack issue, which crippled production for a better part of the quarter.

Before the exceptional item, the loss for TMPVL stood at ₹5,462 crore, compared to a net profit of ₹4,777 crore. Revenue for the quarter fell by 14% from last year to ₹72,349 crore. The company also reported a loss on the Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) front worth ₹1,404 crore, compared to an EBITDA gain of ₹9,914 crore during the same quarter last year.

There was a forex loss of ₹361 crore for TMPVL during the quarter, compared to a forex gain of ₹436 crore last year. Free cash flow during the quarter was a negative ₹8,300 crore due to lower volumes as a result of the cyber attack.

On an adjusted basis, the company reported a net loss of ₹237 crore standalone, compared to a profit of ₹15 crore last year.

Brokerage firm Motilal Oswal initiated coverage on the PV business stock with a "sell" rating and a price target of ₹312, projecting a 20% downside from current levels. The brokerage said that the US tariffs, and China luxury tax will structurally hurt JLR's future performance.

"We lower our target multiple for JLR to 2x EV / EBITDA from 2.5x earlier, to reflect the multiple headwinds it is currently facing," the brokerage wrote.

Motilal Oswal has also lowered JLR's EBIT margin assumption down to 2% for the current financial year, and expects and improvement to 5% by financial year 2028.

Jefferies too maintained its "underperform" rating on the stock with a price target of ₹300. It also sees multiple headwinds for JLR including increased competition, consumption tax in China, higher discounts and the BEV transition, with its key models starting to age. While the India PV business is better placed, it is unlikely to offset the JLR drag, the brokerage said.

Goldman Sachs is "neutral" on the stock with a price target of ₹365, while CLSA retained its "outperform" rating with a price target of ₹450.

Shares of Tata Motors Passenger Vehicles Ltd. are trading 6% lower in early Monday trading at ₹368. This is lower than the ₹400 per share that the stock had begun trading last month, adjusted for the demerger of the Commercial Vehicles business.