Source: Times Now
Tata Motors’ share price recently experienced a significant decline, falling over 3% due to ongoing supply constraints in its Jaguar Land Rover (JLR) division. UBS maintained its ‘Sell’ rating on Tata Motors, setting a target price of ₹825, citing several concerns around the company’s performance in Q2 and its outlook for the upcoming quarters.
Supply Chain Disruptions Impacting JLR
Jaguar Land Rover, a major revenue driver for Tata Motors, faced notable supply chain disruptions in the second quarter of FY25. The supply issues were largely attributed to the shortage of high-grade aluminium, which significantly impacted the production process. Consequently, JLR’s retail sales dropped 3% to 103,108 units compared to the same quarter last year, while production volumes were down 7% to 86,000 units. These constraints also led to a 10% decline in JLR’s wholesale volumes (excluding its China JV) compared to the previous year.
UBS’s Rationale for the ‘Sell’ Rating
UBS’s ‘Sell’ rating is driven by concerns that JLR’s production and sales performance may continue to face headwinds due to supply chain challenges and rising costs. The report also highlighted that discounts for JLR’s flagship models, such as the Range Rover, are likely to increase due to the slower-than-expected recovery in demand. Additionally, UBS is cautious about the lack of new internal combustion engine (ICE) or hybrid vehicle launches in the near term, which could further strain JLR’s financials.
Mixed Outlook from Other Analysts
While UBS maintains a pessimistic view, other brokerage firms have adopted a more neutral or positive outlook. Emkay Global, for instance, reiterated a ‘Buy’ rating with a target price of ₹1,175, citing structural improvements in JLR’s operations and a positive outlook for Tata Motors’ commercial vehicle business in India. Meanwhile, Motilal Oswal maintained a ‘Neutral’ rating with a price target of ₹990, anticipating that JLR’s margins could come under pressure due to rising costs, the shift towards electric vehicles (EVs), and a normalizing product mix.
Market Reactions and Future Prospects
As a result of these mixed signals, Tata Motors’ shares were trading at ₹903.80, down 2.59% from the previous close. Market sentiment remains cautious, as the company’s challenges in its JLR division are seen as potential roadblocks to achieving the growth expected in FY25 and beyond. Analysts believe that a recovery in JLR’s performance, particularly in terms of production volumes and margins, will be critical for improving investor confidence.
Looking ahead, Tata Motors expects both production and wholesale volumes to pick up in the second half of FY25 as the aluminium supply situation stabilizes. The company is also working to address the temporary hold of around 6,500 vehicles in the UK and Europe, which should support its sales performance in the coming quarters.
Tata Motors’ recent stock performance reflects the broader challenges faced by JLR amid supply chain disruptions and market dynamics in key regions like China. While UBS remains bearish on the stock due to these headwinds, other analysts see potential for improvement as supply constraints ease and structural changes take effect. Investors are advised to monitor JLR’s recovery closely, as its performance will play a pivotal role in determining Tata Motors’ overall financial health and share price trajectory in the medium to long term.
Follow for more updates.
