TATAMOTORS - Tata Motors Ltd. Share Price

Tata Motors provided an outlook emphasizing challenges and potential improvements across various segments. Management anticipates gradual improvement in domestic demand, driven by increased spending, lower interest rates, and exciting product launches, particularly in light commercial vehicles (LCVs) post-monsoon. They maintain a cautious but optimistic stance, stating that the global demand environment is expected to remain challenging in the short term.

Key forward-looking points include:

1. Wholesales & Revenue: Wholesales decreased by 9.1% to 300,000 units, with revenue declining 2.5% to Rs. 104,000 crores. However, management expects these figures to improve with the anticipated festive season demand.

2. EBITDA and Profitability: Management noted that EBITDA fell 480 basis points, while profit before tax totaled Rs. 5,600 crores. They aim to return to double-digit EBITDA levels, driven by improved model mix and cost reductions, alongside corrective measures in response to market conditions.

3. Electric Vehicle (EV) Strategy: Tata Motors plans to leverage strong consumer interest in EVs, with expectations of EV volume share rising to 17% in the next quarter. The introduction of a lifetime warranty on high-voltage batteries has positively influenced retail sales.

4. Jaguar Land Rover (JLR): JLR experienced a significant profit drop, with PBT falling to GBP 351 million from GBP 693 million year-on-year. Management indicates that ongoing negotiations regarding tariffs, particularly with the U.S., could alleviate some financial pressures in the future.

5. Commercial Vehicles (CV) Segment: CV market share increased to 36.1%, with EBITDA at approximately 12.2%. Management expects single-digit growth in this sector, particularly spurred by festive demand and recovering rural markets.

6. Cash Flow and Investments: The company expects to recover cash flows as tariff impacts moderate and working capital effects normalize. Investment levels are planned to remain steady, ranging between GBP 850 million to GBP 1 billion per quarter.

7. Future Growth Expectations: Management maintains a cautious outlook for a strong second half in FY26, driven by favorable macroeconomic factors, strategic product launches, and improved dealer inventory conditions.

Q&A Section: Key Questions and Answers

Question 1: Raghu, Nuvama: "How have you accounted for tariffs in the US, and is any rollback possible to May 8? How do you plan to mitigate it in terms of pricing?"

Answer: We accounted for a tariff of 27.5% throughout Q1, as this was the prevailing rate. We are pursuing a rollback to 10% from May 8, but certainty on this is still pending. In the interim, we've proactively reduced sales allowances and slightly increased prices on certain models to manage the impact.

Question 2: Shailesh Chandra: "What is the EBITDA margin guidance moving forward, and how do you see discounts playing out from here?"

Answer: We're committed to returning EBITDA margins to double digits; the next couple of quarters may present challenges. However, improved operating leverage, model mix enhancements, and potential price increases in H2 should contribute to margin recovery.

Question 3: Girish Wagh: "Can you discuss utilization levels and the recent drop in TIV despite good fleet utilization?"

Answer: Fleet utilization remains healthy, but purchase decisions have been postponed due to regional project delays and early monsoons. While utilization metrics are strong, they don't directly correlate with new purchases, which have been impacted by external conditions.

Question 4: Dhiman Gupta: "What do you expect for the PV market in FY26 and any material pickup in demand?"

Answer: We anticipate less than 5% total growth in the PV market for FY26, with an expected material pickup in the second half, driven by lower tax and interest rates, along with consumer demand post-monsoon.

Question 5: Richard Molyneux: "How do you assess the demand conditions in various regions, especially in the US and China?"

Answer: Demand remains muted across regions, with some recovery expected. The US market appears relatively stable, while demand in China has slowed due to recent luxury tax changes. We aim to optimize inventory levels and manage wholesales efficiently during this period.