Tata Motors PV shares drop after Q1 profit falls 80% amid margin pressures

Shares of Tata Motors Passenger Vehicles Ltd declined 4.5% in early trading on Friday, making it the biggest loser on the Nifty 50 after the company reported a sharp decline in Q1 FY27 profit and continued pressure on margins.The stock traded near Rs 334 after closing at Rs 349.60 on Thursday. It has fallen around 9% so far in 2026, compared with a 6.7% decline in the benchmark Nifty 50.Tata Motors PV Profit Plunges 80% To ₹775 Crore, Revenue Rises 9.3% To ₹95,799 Crore Tata Motors PV reported an 80% year-on-year decline in consolidated net profit attributable to shareholders to Rs 775 crore. Revenue from operations, however, increased 9.2% to Rs 95,799 crore. Profit before exceptional items and tax fell 59% to Rs 1,606 crore.The company's domestic passenger vehicle business recorded 65% revenue growth, but higher commodity costs and foreign-exchange movements weighed on profitability. Consolidated free cash flow stood at negative Rs 11,800 crore, primarily due to seasonal working-capital requirements.Brokerages differ on Tata Motors PV outlookAccording to a Moneycontrol report, CLSA remained positive, retaining its ‘Outperform’ rating and a target price of Rs 452, which implies more than 29% potential upside. It noted that JLR’s EBIT margin was better than expected, although domestic PV EBITDA missed estimates. CLSA also highlighted management’s confidence in achieving JLR’s FY27 margin and free-cash-flow targets.On the domestic front, management expects demand to remain strong, with monthly dispatches of 65,000-70,000 units expected over the coming months as inventory builds ahead of the festive season. Nomura maintained a ‘Neutral’ rating with a Rs 389 target, citing strong Indian demand but significant cost pressures. HSBC retained its ‘Hold’ call while reducing its target to Rs 360, warning that commodity-related margin pressure could continue into Q2.Citi was more bearish, retaining its ‘Sell’ rating with a Rs 305 target. It said Q1 performance was substantially below expectations across both JLR and the India PV business.JLR wholesales declined 9.2% due to supply disruptions, the Middle East conflict and the planned Jaguar wind-down. However, management maintained its outlook for strong domestic volume growth and double-digit JLR revenue growth, supported by upcoming model launches.

Shares of Tata Motors Passenger Vehicles declined 5% to Rs 330 on the BSE on Friday after the company reported a sharp 80% year-on-year (YoY) decline in consolidated net profit for the April-June quarter of FY27.The auto majors' net profit fell to Rs 775 crore from Rs 3,924 crore in the same quarter last year, amid supply constraints, including a fire at a key component supplier, the Middle East conflict and a planned Jaguar wind-down.Despite the sharp fall in profit, revenue from operations rose more than 9% YoY to Rs 95,799 crore during the quarter, compared with Rs 87,677 crore in the year-ago period. The company’s EBITDA margin, however, contracted by 130 basis points to 7.4%.Also read: Tata Motors shares jump 6% after strong Q1; Nomura upgrades stock, CLSA retains Outperform ratingJaguar Land Rover reported a 9% YoY decline in wholesales during the quarter. Its revenue fell nearly 10% YoY to £6 billion, while profit plunged 73% YoY to £66 billion in the first quarter.Should you buy, sell or hold Tata Motors PV shares?Nomura remains Neutral on Tata Motors PV, with a target price of Rs 389, implying 11.1% upside. The brokerage sees strong demand in India’s passenger vehicle market, but expects steep cost pressures to weigh on margins. For JLR, the success of new launches remains a key monitorable, while the China outlook remains challenging and the US market offers promise.The stock trades at 3.8x FY28F EV/EBITDA, which Nomura considers undemanding but fair given the risks. Higher India PV volumes and successful JLR launches that drive operating leverage are key upside risks, while weaker JLR margins that keep FCF negative and further margin pressure in India PVs in the near term are the key downside risks.Morgan Stanley maintains its Equal-Weight rating on Tata Motors PV with a target price of Rs 367 (5.5% upside). The brokerage expects strong India PV volumes, with high-teens growth projected in FY27, while August-September dispatches could reach a run rate of 70,000 units per month. However, near-term margins are expected to remain under pressure, with a 350 bps commodity headwind anticipated in Q2.Tata Motors has taken a 0.5% price hike, but continues to face significant cost pressures. The launch of the Avinya has also been pushed to early 2027 from 2026. Morgan Stanley said JLR achieving FCF breakeven and the successful launch of new EV models remain key factors that could support a potential re-rating of the stock.Read more: Tata Motors PV's Shailesh Chandra says capex, strategy to stay unchanged as Chandrasekaran exits Tata SonsCiti maintains its Sell rating on Tata Motors Passenger Vehicles and cut its target price to Rs 305 (12% downside) from Rs 320, implying around 13% downside from the current price level. The brokerage said the first-quarter results came in well below its estimates across both JLR and the India PV business. Citi also flagged severe cost headwinds and expects margins to remain under pressure in the second quarter, despite healthy underlying demand in India.Motilal Oswal retains its Sell rating on Tata Motors PV with a target price of Rs 310, implying 11% downside. Given the multiple headwinds ahead, the brokerage has refrained from making any material changes to its FY28 estimates at this stage. While the India business has continued to gain market share, margins remain under pressure due to an adverse mix and rising input costs.JLR is also facing multiple challenges on both the demand and cost fronts. Although JLR has started a major cost-reduction initiative, Motilal Oswal expects it to only partially offset the current headwinds. Given the significant challenges facing JLR and continued geopolitical uncertainty, the brokerage has reiterated its Sell rating on the stock.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)