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Tata Motors Q4FY22 Review: Operating margins expand QoQ, guides for near zero net auto debt by FY24!

ICICIdirect Research 13 May 2022 DISCLAIMER

What’s Buzzing

Tata Motors (TML) reported a healthy performance in Q4FY22 and was a beat to our estimates. Sequential jump in EBITDA margins to the tune of ~220 bps at 14.7% was a key positive surprise for the quarter. It was primarily driven by operational outperformance at all key divisions namely India CV, PV as well as JLR.


Consolidated total operating income for the quarter came in at Rs 78,439 crore, up 8.6% QoQ. Reported EBITDA for Q4FY22 was at Rs 11,494 crore with corresponding EBITDA margins at 14.7%. QoQ margin improvement was on primarily on account of savings realised under other expenses (310 bps QoQ) with gross margins declining ~150 bps QoQ. India CV business reported EBITDA margins of 5.9% (up 330 bps QoQ) while the same in PV business was at 6.9% (up 270 bps QoQ) and at JLR was at 12.6% (up ~60 bps QoQ). Consolidated loss after tax was at Rs 1,033 crore for Q4FY22.

Our Perspective

Tata Motors (TML) is the third largest auto OEM in domestic PV space (market share at 12.2%) & market leader in the domestic CV space (market share at 44.6%). It also has its presence in global luxury car market through Jaguar Land Rover (JLR). TML remains committed to EBIT improvement and positive FCF generation in FY23, to be near net automotive debt free by FY24 (~Rs 48,700 crore as of FY22). The management commentary on future demand prospect and improved profitability was positive. JLR expects chip availability to gradually improve over the course of FY23 and guided for 5% EBIT margins & FCF of £1 billion+ for FY23. The company stands committed to its long term EBIT margin guidance of >=10% by FY26. It however expects a softer Q1FY23 due to Covid lockdowns in China as well as the new Range Rover Sport model changeover, resulting in negative EBIT and negative free cash flows in the quarter. The company is at the forefront of electrification with launch of concept EV’s (“Curvv” and “Avinya”) & Jaguar seen as all-electric brand by 2025, six Electric Vehicle (EV) launches by Land Rover in the next five years. It has a pole position in EV passenger vehicle market domestically with market share of 87% (FY22) and Nexon as its top selling product. Recently product launches at TML include long range version of its top selling Nexon EV & Plug-in hybrid (PHEV) version of Range Rover Sport. Key monitorables for the company going forward would be easing of semi-conductor supply side issues and consequent ramping up of volumes at JLR, competitive product launches on the EV front, robust cash-flow generation and consequent retirement of automotive debt on b/s.

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