Tata Motors share price

Tata Motors Shares Climb 3% on Positive H2 Outlook Despite Q2 Profit Dip

Shares of Tata Motors rose by 3.16% to ₹831.20 on the BSE on Monday, November 11, following the company’s Q2 FY25 earnings announcement and a reassuring management outlook for the second half of the fiscal year (H2 FY25). While Tata Motors faced challenges in Q2, such as supply chain constraints, investors found optimism in the company’s forecast for a stronger H2, which drove up the stock.

Q2 FY25 Earnings Highlights

1. Profit Decline

1. • Consolidated net profit fell by 11.18% YoY, coming in at ₹3,343 crore compared to ₹3,764 crore in the same period last year.

2. Revenue

1. • Total revenue from operations stood at ₹101,450 crore, a 3.49% decrease from ₹105,129 crore in Q2 FY24.

3. Earnings per Share (EPS)

1. • Basic EPS for the quarter was ₹9.72, down slightly from ₹9.81 in the year-ago period.

4. EBITDA and EBIT

1. • EBITDA was ₹11.6K crore (11.4% margin), down 230 basis points (bps).
   • EBIT came in at ₹5.6K crore (5.6% margin), down 190 bps, reflecting a challenging external environment.

Segment Performance

1. Jaguar Land Rover (JLR)

1. • JLR revenue fell by 5.6% to £6.5 billion due to temporary supply constraints, impacting EBIT margins, which decreased by 220 bps to 5.1%.

2. Commercial Vehicles (CV)

1. • CV revenue declined by 13.9%. However, EBITDA margins improved to 10.8%, up 40 bps, driven by favorable pricing and material cost savings despite adverse volume trends.

3. Passenger Vehicles (PV)

1. • PV revenue dropped by 3.9%, while EBITDA margins remained stable at 6.2%, benefiting from a better product mix and cost-saving measures.

Management Commentary and H2 Outlook

Tata Motors expressed confidence in its H2 FY25 performance, expecting significant improvement as supply challenges ease. The company anticipates a sharp rise in JLR wholesales and aims to achieve net debt-free status by the end of the year.

PB Balaji, Group CFO, Tata Motors, commented, “The quarter faced external challenges, but our business fundamentals are robust. With easing supply issues and rising demand, we are focused on enhancing growth, competitiveness, and free cash flows, which should lead to a strong H2.”

Key Takeaways

• Positive H2 Forecast: Management’s optimism about easing supply constraints and demand recovery has positively influenced market sentiment.
• Cost Control Success: Despite revenue declines, Tata Motors improved or maintained EBITDA margins across segments by focusing on pricing strategies and cost efficiency.
• Investor Confidence: The company’s plan to become net debt-free by year-end and improve performance has been well-received by the market, contributing to the share price rally.

Conclusion

Despite a challenging Q2, Tata Motors’ strong fundamentals, proactive cost management, and positive outlook for H2 have garnered investor support. With the anticipated recovery in JLR and other segments, Tata Motors is positioned for steady growth in the coming quarters.

FAQs

Q1: Why did Tata Motors’ net profit decline in Q2 FY25?
The decline was mainly due to supply chain constraints and other external challenges impacting revenue and margins.

Q2: How did each segment perform in Q2 FY25?
JLR faced supply constraints, CV revenues were down but margins improved, and PV revenues slightly declined with stable margins.

Q3: What is Tata Motors’ outlook for H2 FY25?
The company expects supply issues to ease, leading to improved performance, particularly for JLR. Tata Motors also aims to become net debt-free by year-end.

Q4: How did Tata Motors manage to improve margins despite lower revenue?
Through favorable pricing strategies, material cost savings, and product mix improvements across its segments.

Q5: Why did Tata Motors’ stock rise despite lower Q2 profit?
Investors responded positively to the management’s confident outlook for H2 and the company’s plan to reduce debt and improve cash flow.

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