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Tata Motors Plunges 9% as JLR Demand Concerns, Weak Q3 Earnings Drag Stock Down to 52 Week Low

Tata Motors Plunges 9%
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On January 30, 2025, Tata Motors’ share price plunged nearly 9%, hitting a 14-month low. The sharp decline was driven by concerns over the performance of its luxury vehicle arm, Jaguar Land Rover (JLR), following the company’s third-quarter financial results. 

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Source: NSE

Margin pressures and weak Q3 earnings, largely due to a demand slowdown, especially in China, prompted brokerages to slash price targets, with some lowering them to ₹660. Jefferies set the lowest target among analysts at ₹660, as Tata Motors’ stock has already plunged 42% from its peak. CNBCTV18/Moneycontrol

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Source: Moneycontrol

Third-Quarter Financial Highlights of Tata Motors

Tata Motors reported a 22% year-on-year decline in its consolidated net profit, reaching ₹5, 578 crore for the quarter ending December 2024 as compared to ₹7,145 crore for the same quarter, last year. Despite a sequential recovery, the weak performance was primarily due to margin pressures and sluggish Jaguar Land Rover (JLR) volumes. 

Revenue grew by just 2.7% to ₹1,13,575 crore, supported by a modest rise in overall sales. Analyst’s polls had projected revenue at ₹1,16,873 crore and net profit at ₹6,525 crore, indicating that Tata Motors fell short of expectations on both fronts.

Market Cap (in Crore) as of 30.1.25LowHighCMPDecline in RevenueDecline in ProfitROCE %
₹2,58,874₹683₹1179₹7032.7%22%20.1
Source: Moneycontrol/Screener

The other significant factor in this shortfall was JLR’s performance, where the profit before tax decreased by nearly 17% year-over-year to 0.52 billion dollars. This division alone accounts for about three-quarters of Tata Motors’ overall pre-tax profit. reuters.com

Challenges in Key Markets

JLR faced notable challenges in crucial markets:
  • China: The company highlighted weak demand in China but expressed optimism for improvement in the current quarter.
  • Europe: Analysts pointed out that European consumers increasingly opt for more affordable local alternatives, posing a challenge for JLR’s market share.

These regional difficulties have raised concerns about JLR’s growth prospects and profit margins.

Analysts’ Reactions and Downgrades

In response to the earnings report and the cautious outlook provided by Tata Motors’ management, several brokerage firms adjusted their positions:

  • Nomura: Downgraded Tata Motors from “buy” to “neutral,” citing potential demand risks for JLR and uncertainties in global auto demand.
  • Morgan Stanley: Lowered its rating to “equal weight” from “overweight,” noting that much of the positive news had already been factored into the stock’s price.
  • UBS: Maintained a “sell” rating, describing the third-quarter results as “underwhelming” and expressing concerns about JLR’s margin risks due to a weakening product mix.

These downgrades reflect apprehensions about Tata Motors’ ability to achieve its margin targets and navigate the evolving market landscape. cnbctv18.com

Domestic Market Performance

Within India, Tata Motors’ performance also faced challenges. The company’s local car sales increased by only 1%, below the industry average growth of 4.5%. This indicates that Tata Motors is growing slower than its competitors in the domestic market. reuters.com

Investor Sentiment and Market Impact

The combination of lower-than-expected profits, challenges in key international markets, and a subdued domestic performance led to a decline in investor confidence. This was evident in the significant drop in Tata Motors’ share price, making it one of the top losers on the Nifty 50 index on that day.

Looking Ahead

Tata Motors has acknowledged the current challenges and remains vigilant, particularly concerning demand fluctuations in China and Europe. The company intends to monitor these markets closely and adjust strategies as needed.

 However, analysts have expressed concerns about clarifying JLR’s growth trajectory and profit margins for the upcoming fiscal year. Given the present circumstances, achieving the previously set annual margin target of 8.5% is now considered ambitious.

Conclusion

In summary, Tata Motors is navigating a period of significant international and domestic challenges. The company’s ability to address these issues and adapt to changing market dynamics will be crucial in restoring investor confidence and achieving its financial objectives.

FAQs

  1. Why did Tata Motors stock plunge?

    Concerns about Jaguar Land Rover (JLR) demand and weak Q3 earnings triggered the stock’s sharp decline. Investors are worried about the impact of the global economic slowdown on luxury car sales.

  2. What were the key concerns regarding JLR?

    Slowing demand in key markets like China and Europe and rising input costs are impacting JLR’s profitability and raising concerns about its near-term performance.

  3. How did Q3 earnings contribute to the fall?

    The weak Q3 results, likely reflecting lower sales volumes and higher costs, disappointed investors and further fueled the sell-off in Tata Motors stock.

  4. What does a 52-week low signify?

    A 52-week low indicates the stock has reached its lowest price in the past year. This often signals negative investor sentiment and can lead to further selling pressure.

  5. What should investors do?

    Investors should carefully assess their risk tolerance and consider the long-term prospects of Tata Motors. It’s crucial to conduct thorough research and potentially consult a financial advisor before making any investment decisions.

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I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.

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