Tata Motors, the Indian automotive giant, witnessed a significant sell-off in its share price during the early trading session on Monday, following the announcement of its fourth-quarter results for the fiscal year 2024 on the previous Friday.
The company’s stock opened with a downside gap of ₹1,005 per share on the National Stock Exchange (NSE) and swiftly plunged to an intraday low of ₹947.20, marking an intraday loss of over 9 percent.
The sharp decline in Tata Motors’ share price can be attributed to the muted performance reflected in its Q4 2024 results, which failed to meet market expectations.
Chirag Jain, a Senior Research Analyst at Emkay Global Financial Services, provided insightful analysis, linking the share price drop to the company’s lackluster quarterly performance.
Jain stated, “Tata Motors’ Q4 2024 results were muted, with limited margin expansion across businesses despite higher volumes.
The company remains cautiously optimistic across businesses, with the first half of the fiscal year expected to be weaker, and the premium luxury segment seen as resilient amid overall emerging demand concerns.”
Jain further highlighted the potential challenges facing Tata Motors, suggesting that the best may be behind for all businesses. He cited several factors contributing to this outlook, including a declining order book, a normalizing mix, and higher customer acquisition costs at Jaguar Land Rover (JLR), which could lead to a normalization of free cash flow generation.
Additionally, the flattish growth outlook for the domestic commercial vehicle space and a moderating India passenger vehicle outlook, though Tata Motors is expected to outperform due to new launches, were cited as potential headwinds.
Emkay Global’s analysis projects a consolidated revenue/EBITDA compound annual growth rate (CAGR) of 7/8% for Tata Motors over the fiscal years 2024–2026, with earnings per share (EPS) estimates for FY25E/26E largely unchanged.
However, Jain expects further downside in Tata Motors’ share price, potentially reaching the ₹950 level.
Motilal Oswal, another prominent brokerage firm, reiterated its “neutral” view on Tata Motors’ share price outlook.
In a report, Motilal Oswal stated, “Tata Motors’ 4QFY24 result was operationally in line with our estimate, as EBITDA margin expanded 30 basis points (bp) quarter-on-quarter to 14.2%.
While there is no doubt that Tata Motors has delivered an extremely robust performance across its key segments in FY24, there are clear headwinds ahead that are likely to hurt its performance.”
The report further mentioned that Motilal Oswal has lowered its EPS estimates for Tata Motors by 3% and 5% for FY25 and FY26, respectively.
The stock is currently trading at 18x/15.6x FY25E/FY26E consolidated EPS and 6.2x/5.3x EV/EBITDA. Motilal Oswal maintains a “Neutral” rating on the stock, with a fiscal year 2026 sum-of-the-parts (SOTP) based target price of ₹955.
In the Q4 2024 results, Tata Motors reported a significant 222 percent year-on-year increase in its net profit, reaching ₹17,407.18 crore. However, the company’s consolidated revenue witnessed a more modest 13.3 percent surge, amounting to ₹1,19,986.31 crore.
While Tata Motors’ strong performance in the previous fiscal year is commendable, market participants remain cautious about the company’s future prospects, given the potential headwinds and challenges outlined by analysts.
The muted Q4 2024 results have further fueled concerns, leading to a sharp sell-off in the stock’s price.
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