Tata Motors PV shares fall after profit plunges, warns on margins

India's Tata Motors Passenger Vehicles (PV) experienced a significant 6% drop in shares on Friday following a staggering 80% decline in quarterly profit. The company issued a warning that margin pressures would continue into the upcoming second quarter, marking its steepest one-day percentage decline since June 17. The PV stock closed at 332.85 rupees, registering a substantial loss.

During a post-earnings call on Thursday, CEO Shailesh Chandra acknowledged that commodity-related cost pressures were anticipated to persist throughout the July-September quarter. Chandra further stated, "The second quarter is going to hit us badly. Not just us, but the whole industry will get hit."

The first-quarter margins at both the luxury unit Jaguar Land Rover (JLR), which constitutes approximately 80% of Tata Motors PV's revenue, and the domestic passenger vehicle business fell short of analysts' projections. Tata Motors PV is grappling with several challenges at JLR, including heightened competition, substantial discounts, and elevated warranty costs, according to Jefferies in a recent note.

The brokerage firm revised its earnings per share estimate for FY27 by 10% and reduced its target price on the stock, while retaining its "underperform" rating.

Nomura, another brokerage firm, expressed concerns over the margin pressure at JLR and in the domestic passenger vehicle sector, which may negatively impact the company's cash generation in the near term. Despite these challenges, Nomura maintained its "neutral" rating on the stock. In its latest report, Tata Motors PV disclosed a first-quarter consolidated net profit of 7.75 billion rupees, a sharp contrast to the 39.24 billion rupees earned during the same period in the previous year.