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Tata Motors’ stock traded mildly lower on May 15, down 0.23 per cent at Rs 396.05, despite the company’s Q4FY25 performance beating Street estimates on the consolidated front. The stock has corrected nearly 5 per cent in the last one month and remains flat on a six-month basis. Year-to-date, Tata Motors has gained around 13 per cent, but Nuvama Institutional Equities has turned cautious.

Nuvama retains ‘Reduce’, target cut to Rs 380

In a post-earnings note, Nuvama Institutional Equities reiterated a ‘Reduce’ rating on Tata Motors, assigning a target price of Rs 380—implying downside from current levels. While the company reported strong growth in consolidated EBITDA and margins, the brokerage flagged several short- to medium-term headwinds, especially around the domestic PV business and electrification capex.

JLR drives Q4 beat, but risks ahead

Tata Motors’ consolidated net profit surged 23 per cent YoY to Rs 8,064 crore in Q4FY25, while revenue rose 13.3 per cent to Rs 1.18 lakh crore. The beat was largely led by Jaguar Land Rover (JLR), which posted a robust EBITDA margin of 15.3 per cent and strong free cash flow. However, Nuvama warned that chip shortages, demand moderation in EVs in Europe, and pricing pressure could drag JLR margins going forward.

Domestic CV and PV segments in focus

The brokerage highlighted that while commercial vehicle (CV) demand stayed steady, the PV business faced challenges amid rising competition. Tata Motors’ EV portfolio growth also slowed sequentially, with management indicating cautious optimism for FY26. Nuvama believes the need for sustained EV investments and macro uncertainty may cap near-term upside.

What should investors do?

Despite the solid Q4, Nuvama’s cautious stance reflects concerns about valuation, cyclical risks in the CV business, and intense pricing pressure in the Indian PV space. Investors are advised to book profits at higher levels and wait for better entry points. The firm is confident about Tata Motors’ long-term potential, but sees limited room for outperformance in the near term.

Stock outlook and recent performance

Tata Motors has rallied over 75 per cent in the last one year, driven by consistent JLR recovery, better operating leverage, and easing debt concerns. However, post-Q4 earnings, the muted market reaction suggests the positives may have been priced in. The stock is likely to stay range-bound in the near term unless there’s a strong catalyst from JLR or EV breakthroughs.

Key takeaway

Nuvama’s ‘Reduce’ stance underlines the importance of being selective in auto plays after a strong FY25 rally. While long-term fundamentals remain strong, near-term volatility and stretched valuations call for caution.

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