Tata Motors shares plunge 9% after significant price target downgrade
What's the story
Shares of Tata Motors, the famous automaker behind Jaguar Land Rover (JLR), plummeted by a whopping 9% in early trading on Thursday.
The fall, which marked a new 52-week low for the company, came after international brokerage firm Jefferies downgraded the stock to "underperform."
Jefferies also cut its price target for Tata Motors from ₹930 to ₹660, translating to a drop of nearly 29%.
Financial performance
Tata Motors' Q3 financial results disappoint investors
Tata Motors reported a 22% decline in net profit for the December quarter at ₹5,451 crore. However, the company's revenues increased marginally by 2.7% to ₹1.13 lakh crore.
On the Bombay Stock Exchange (BSE), Tata Motors' stock value dropped to ₹684.25 from its previous closing price of ₹752.45, mirroring the market's response to the financial results and Jefferies's downgrade.
In the last six months, the stock has dropped by a hefty 40% while broader market indices have corrected nearly 12%.
Market struggles
JLR faces challenges amid China's luxury car market slowdown
Tata Motors' subsidiary Jaguar Land Rover (JLR) is facing a slowdown in China's luxury car market as car retailers are facing financial issues.
"We do see stress in China at an industry level. The premium market is down 14% year-on-year from April to December 2024," said Tata Motors' chief financial officer PB Balaji.
However, Balaji is optimistic about JLR's performance and growth in the coming quarters.
Domestic outlook
Tata Motors anticipates improved demand in domestic market
Tata Motors' domestic passenger vehicle business saw a 4.3% year-on-year decline in revenues to ₹12,400 crore.
However, the company's EBITDA increased by 120 basis points to 7.8%.
Balaji was optimistic about a gradual improvement in demand owing to various factors.
"We believe infrastructure investments will continue this year," he said, adding that "demand will come back once the sentiment changes and once we are able to turbo-charge consumption."
Financial details
Tata Motors' consolidated EBITDA and PLI benefits
Tata Motors' consolidated earnings before interest tax depreciation and amortization (EBITDA) for the third quarter was at 13.7%, down 60 basis points year over year.
The company also received ₹351 crore under the production-linked incentive scheme (PLI) in Q3 for the past and current year.
These factors helped reduce Tata Motors' net automotive debt, which now stands at ₹19,200 crore.