Extending their bull run, shares of Tata Motors marked a new one-year high of ₹537.15 apiece in Monday's trading session following the company's stellar March quarter performance. In Q3 FY23, the global automobile manufacturer turned profitable for the first time in seven quarters, reporting a net profit of ₹2,957 crore.
In the March quarter, the company reported an even stronger performance with a net profit of ₹5,408 crore compared to a net loss of ₹1,032.84 crore in the same period of last year. Sequentially, the net profit rose by 83%.
The company achieved its highest-ever revenue of ₹1,05,932 crore in Q4FY23, indicating a remarkable YoY increase of 35% and a QoQ increase of 19.71%. The operating profit came in at ₹14,000 crore in Q4.
The better performance can be attributed to various factors, including strong demand in India, leading to improved volumes and better supplies at JLR. Additionally, pricing actions and a richer mix contributed to improved ASPs and higher revenue growth.
The company also benefited from easing inflation, a better mix, pricing actions, and favourable operating leverage, resulting in significant improvements in margins and profits.
Strong Q4 performance across all core-auto segments
The company's three core automotive businesses, including Jaguar Land Rover (JLR), Tata Commercial Vehicles, and Tata Passenger Vehicles, all experienced robust revenue growth. Specifically, Jaguar Land Rover reported a revenue increase of 49% YoY, while Tata Commercial Vehicles and Tata Passenger Vehicles registered a revenue growth of 15% YoY and 15.3% YoY, respectively.
Jaguar Land Rover (JLR) reported a YoY volume growth of 24% YoY to 94.7k in Q4. The company's Q4 EV volumes (including exports) reached a record high of 16.0K units, representing a YoY increase of 70%.
For the entire fiscal year FY23, the company crossed the significant landmark of 50,000 annual sales in EVs, its highest ever, to post a growth of 154% over FY22.
Going forward, the company said it will continue to deliver on new product launches, debottleneck capacities, and drive EV penetration further to deliver market-beating growth in the coming years.
Significant turnaround
For the fiscal year that ended on March 31, 2023, the company posted a consolidated net profit of ₹2,414 crore, marking a significant turnaround after four consecutive years of losses that began in FY 2019. In FY22, the company registered a net loss of ₹11,441 crore.
During FY23, the Tata Group firm recorded an all-time high revenue of ₹3,45,967 crore.
Domestic passenger vehicle wholesales stood at 5.38 lakh units in FY23, up 45% as compared with the 2021–22 fiscal.
In an exchange filing, the company said there was a net auto debt reduction of ₹13,800 crore in FY23. The India business net debt was the lowest in 15 years at ₹6,200 crore, it stated.
Top gainer in the Nifty 50 Index
Tata Motors shares have shown a remarkable performance in the current year so far, yielding nearly 36.75% return, climbing from ₹387.95 apiece to the present market price of ₹530.55.
In April alone, it gained 15.24%, and in the current month so far, the stock is up 9.46%. The stock also ranked as the top gainer in the Nifty 50 Index.
Furthermore, taking the current trading price into account, the stock is 13.39% away from its all-time high of ₹612.40, which was achieved in 2015.
Brokerages stay bullish on the stock
Kotak Institutional Equities has stated that the company has reported decent operating performance, resulting in the generation of ₹113 billion of FCF. It expects that the operating performance will continue to improve, due to two reasons: the gradual recovery in JLR volumes and steady demand conditions in the domestic markets.
As a result of these factors, the brokerage anticipates a decrease in debt and an improvement in the company's financial situation.
The brokerage has increased its FY2024–25 consolidated EBITDA estimates by 11–15% due to higher volume and ASP assumptions as well as higher EBITDA margin assumptions for the JLR business, aided by an improvement in chip availability and a richer product mix.
It maintains an 'add' rating on the stock and raised its target price to ₹530 apiece from ₹450 earlier. Likewise, Motilal Oswal has reiterated its 'buy' tag on the stock with a target price of ₹590 apiece.
ICICI Direct Research also kept its 'buy' recommendation on Tata Motors with a target price of ₹650 apiece, citing healthy profitability across all business segments.
The brokerage expects a healthy 20.1% revenue CAGR over FY23–25E, driven by a 10% total volume CAGR amid healthy wholesale visibility on the JLR front.
32 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
