Analysts cautiously optimistic on Tata Motors amid JLR vol concerns in FY26

Analysts are cautious about JLR's performance in FY26, especially with the discontinuation of Jaguar models and a weaker outlook in China, a key market for JLR.

Automobile giant Tata Motors’ shares were in demand on Wednesday as the stock rallied as much as 3.69 per cent to hit an intraday high of ₹671.80 per share, before settling 3.18 per cent higher at ₹668.45.

 

In comparison, the BSE Sensex settled 0.10 per cent, or 72.56 points, lower at 74,029.76. The northward move came after analysts said they were cautiously optimistic about the company’s prospects, following recent discussions with its Group Chief Financial Officer, P B Balaji. “Jaguar Land Rover (JLR) is well-positioned to achieve its FY25 Ebit margin targets, which will contribute to a net cash positive position by the end of FY25," said Balaji.

 

The brokerages noted that the company’s luxury division JLR was on track to meet its earnings before interest, tax (Ebit) margin guidance of at least 8.5 per cent for FY25, supported by revenue projections of 29 billion pounds. This will mark a major milestone, allowing JLR to turn net cash positive by the end of FY25.

 

However, analysts are cautious about JLR’s performance in FY26, especially with the discontinuation of the Jaguar models and a weaker outlook in China. JLR’s strong performance in the US market is a key bright spot. “The top three models — Range Rover, Range Rover Sport, and Defender — are outperforming peers across regions, especially in the US,” said Balaji. 

 

EV launches to aid growth

  JLR has several electric vehicle (EV) launches lined up that could drive growth. The transition to EVs is the bedrock of the company’s strategy, and Balaji is confident that it will meet its emissions targets despite the slower-than-expected customer adoption of EVs. “Our electric vehicle pipeline is strong, and we are confident in our ability to meet emissions targets,” he said.

 

Cost strategy 

Balaji said JLR’s high warranty costs, particularly in the US, where more vehicles sold in recent years have resulted in higher claims. He said the company plans to reduce warranty costs to around 3 per cent from the current 5.9 per cent by FY25. Analysts at Nuvama and Nomura are hopeful that these cost-saving measures will boost JLR's operational efficiency in the coming years.

 

They are upbeat about the company’s passenger vehicle (PV) segment. The upcoming launch of models like the Harrier EV, Sierra, and the repositioning of the Curvv model are expected to drive volume growth in FY26. Tata Motors has delivered a steady performance in the commercial vehicle (CV) space, particularly in the medium and heavy commercial vehicle (MHCV) sector.

 

Despite the challenges, analysts are largely positive about Tata Motors' long-term prospects. Nuvama revised its revenue and Ebitda CAGR estimates for FY25–27 to 2 per cent, while maintaining a 'reduce' rating for an unchanged target price of ₹720.

 

Nomura analysts maintain a 'buy' rating with an unchanged target price of ₹861 based on a sum-of-the-parts (SOTP) valuation. They expect JLR’s Ebit margins to remain strong at 8.6 per cent in FY25, 8.1 per cent in FY26, and 8.9 per cent in FY27, and also see upside potential in Tata Motors' PV business, with estimated volume growth of 4 per cent in FY26 and 6 per cent in FY27. Macquarie and CLSA have reportedly maintained ‘outperform’ with a target price of ₹826 and ₹930, respectively.

 

While there are headwinds, particularly related to US tariffs and JLR's model transition, analysts believe Tata Motors is well-positioned to navigate these challenges. With a focus on electrification, improved service offerings, and strategic product launches, the company is set to see steady growth in the coming years, supported by the ongoing transformation of its JLR division and its strong presence in the Indian market.