Shares of Tata Motors jumped 6% in opening trade on Friday, in an otherwise weak broader market, as investors cheered the carmaker’s December quarter earnings, which beat the earnings estimate. The Tata group company turned profitable for the first time in the last seven quarters in Q3 FY23, on the back of strong sales and robust demand.

Boosted by strong Q3, Tata Motors share price opened 5% higher at ₹440 against the previous closing price ₹419 on the BSE. In the first hour of trade so far, the auto heavyweight surged as much as 6.1% to ₹453.20, while the market capitalisation stood at ₹1.49 lakh crore. In comparison, the BSE Sensex was trading 513 points lower at 59,691 levels.

The share price of Tata Motors touched a 52-week high of ₹519.50 on January 31, 2022, while it hit a 52-week low of ₹366.05 on May 12, 2022.

Tata Motors posted a net profit of ₹2,957.71 crore for the quarter ended December 31, 2022, against a loss of ₹1,516.14 crore in the corresponding period of last fiscal. Revenue from operations grew 22.5% YoY to ₹88,488.59 crore compared with ₹72,229.29 crore in the same quarter last fiscal.

The auto maker’s luxury car unit Jaguar Land Rover (JLR) also turned profitable, posting Q3 profit after tax of 261 million pounds compared with a loss of 98 million pounds in the previous quarter. Revenue stood at 6 billion pounds, up 28% year-on-year and 15% sequentially, as chip shortages eased in the quarter and production and wholesales increased.

“JLR has returned to profit as chip shortages eased in the quarter and production and wholesales increased. These improved results are testament to the hard work and dedication of our people across the business who have delivered a further increase in production of our New Range Rover and Range Rover Sport models,” says Adrian Mardell, Jaguar Land Rover’s Interim Chief Executive Officer.

Revenue of Tata Motors’ commercial vehicle arm, Tata Commercial Vehicles, jumped 22% to ₹16,900 crore. EBITDA margins of the CV unit were 8.4% (up 580 basis points Y-o-Y) and EBIT margins were at 5.9% (up 650 bps) led by better mix, higher realisations, cost savings and softened commodity prices, the company says.

Tata Motors’ passenger vehicle revenue rose 37% year-on-year to around ₹11,700 crore, reflecting higher volumes and realisations. EBITDA margins were 6.9% (up 370 bps) and EBIT margins were at 1.5% (up 510 bps), driven by improved volumes and mix, higher realisations, softening commodities and certain one offs, the filing says.

“We remain cautiously optimistic on the demand situation despite global uncertainties. We will remain vigilant on demand and our continued focus on profitable growth, improving semiconductor supplies and stable commodity prices will aid revenue growth, margin improvement and positive cash delivery in Q4 FY23,” the automaker says.

On commercial vehicles, Tata Motors says the CV industry is poised for growth on the back of increased infrastructure activity, demand for last mile mobility and strong recovery in the bus segment. “Going forward, we expect a good replacement demand, especially in MHCVs in Q4 FY23, as we also maintain a close watch on the evolving geopolitical situation, inflation and interest rate risks on both the supply and demand,” it says.

Passenger vehicle wholesales grew 33% year-on-year, driven by strong demand for Nexon, Nexon EV, Punch, Tiago and Tigor CNG, says the carmaker. The company commenced deliveries of Tiago.ev in January 2023.

Brokerages on Tata Motor Q3 results

Foreign research firm has maintained a ‘Buy’ rating on the stock with a target at ₹508 per share, citing that improvement in Q3 margin across segments. JLR to benefit from rising chip supply and India CV strategy to reduce disc working well, it said.

Another foreign brokerage house Jefferies has also kept ‘Buy’ rating on Tata Motors and raised the target price to ₹565 per share, a potential upside of 34.5% from the current market price. The research agency in its report said that Q3 EBITDA grew to a 7-quarter high and was 25% above the estimates, supported by better mix and pricing

Domestic research firm ICICI Direct has upgraded the stock from “Hold” to “Buy” with a price target of ₹530, a potential upside of 25% from the current market price. “We upgrade the stock from HOLD to BUY due to JLR's progressive volume recovery, healthy positive EBIT margin profile and FCF visibility for FY24E, with fundamental drivers for healthy growth in domestic operations,” it said.

The agency expects Tata Motors to post healthy 18.2% revenue CAGR over FY22-25E, driven by 13.8% total volume CAGR amid healthy order book at JLR (2.15 lakh units). Limiting discount in CV space amid aspiration for double-digit margins as well as the company’s intent to go net debt free though fresh equity raise in EV-PV space and partial sale of stake in Tata Technologies though IPO will be key triggers for future price performance, it said.

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