Tata Motors Q2 FY25 Earnings Report: Profit Decline, JLR Setbacks, and a Cautious Outlook
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Tata Motors faced a challenging Q2 in FY25, as its consolidated net profit dropped by 11% year-on-year to ₹3,343 crore, driven primarily by underwhelming performance in its Jaguar Land Rover (JLR) unit and domestic commercial vehicles segment. Consolidated revenue for the July-September quarter saw a 3.5% decline, standing at ₹1.01 lakh crore, largely affected by lower sales volumes, as per Tata Motors' statement to the stock exchanges.
The automaker’s Q2 earnings came in below market expectations. Analysts surveyed by Moneycontrol had estimated that revenue would remain flat at around ₹1.05 lakh crore and projected a 32% jump in net profit to ₹4,968 crore. EBITDA fell by 230 basis points, landing at 11.4%, further underscoring the company's quarterly struggle.
In its earnings commentary, Tata Motors issued a cautious outlook, particularly regarding near-term domestic demand. However, the company remains optimistic about potential uplift from the festive season and significant investments in infrastructure, which could boost demand in the coming quarters.
Impact on Tata Motors' Stock Performance
Ahead of the earnings release, Tata Motors shares closed down 2% on Friday, settling at ₹803.55 on the NSE. This recent decline brought the company’s market capitalization to approximately ₹3 lakh crore. Notably, Tata Motors stock has experienced a sharp 31% drop since August, despite nearly doubling in the prior 12 months.
Key Highlights: Jaguar Land Rover (JLR)
JLR reported a 5.6% drop in revenue, amounting to £6.5 billion, hindered by temporary supply constraints, including issues in aluminum supply. This led to an impact on profitability, with the EBIT margin dropping 220 basis points to 5.1%. JLR's profitability was further dampened by the hold on 6,029 vehicles for additional quality control checks. Despite these hurdles, Tata Motors anticipates a positive Q3 for JLR, particularly supported by the upcoming festive season.
Domestic Commercial Vehicles: Sluggish Demand and Revenue Drop
Domestic commercial vehicle revenue fell 13.9% to ₹17,288 crore, impacted by slower infrastructure development, reduced mining activity, and decreased fleet utilization due to heavy rains. Domestic wholesale CV volumes were down 19.6% year-on-year, at 79,800 units. Nevertheless, the commercial vehicle segment’s EBITDA margin improved slightly to 10.8%, owing to favorable pricing strategies and material cost savings.
Passenger Vehicles: A Mixed Bag
Passenger vehicle revenue dipped 3.9% to ₹11,700 crore. However, EBITDA margins for this segment held steady at 6.2%, even amidst demand challenges. Tata Motors emphasized that while domestic demand appears muted in the short term, strategic moves, combined with festive demand, could offer a boost in the near future.
Conclusion: Tata Motors navigates a complex market environment with mixed performance across its segments. While facing challenges in JLR and domestic commercial vehicles, the company remains cautiously optimistic about Q3, fueled by seasonal demand and infrastructure projects.
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