Deven Choksey Research maintains an 'Accumulate' rating on Tata Motors post the Q1FY26 results, citing resilient fundamentals, portfolio expansion, and a robust electric vehicle (EV) strategy amid operational turbulence. While near-term performance has been hamstrung by US tariffs and sluggish domestic demand, the brokerage sets a target price of Rs 722 per share, suggesting a moderate upside from current levels.

Result Highlights: Q1FY26 Softness Tempered by Strategic Initiatives

Revenue Performance:
Tata Motors posted a consolidated revenue of Rs 1,044.1 billion, down 2.5% year-on-year and 12.6% sequentially. The erosion was connected to soft domestic demand and weak Jaguar Land Rover (JLR) volumes, partially cushioned by product mix improvements.

Profitability Strain:
Consolidated EBITDA plunged 35.1% YoY to Rs 97.2 billion, with margins dropping sharply by 467 basis points to 9.3%. The principal culprits: US tariff impact on JLR, higher vehicle marketing expenses, greater warranty outlays, adverse foreign exchange movements, and muted domestic passenger vehicle momentum.

Net Profit Decline:
Adjusted net profit was recorded at Rs 34.8 billion, sliding 34.6% year-on-year, in line with expectations. EBIT margin at JLR contracted 490 bps to 4.0% owing to model transitions and punitive US tariffs.

US Tariffs and JLR Performance: Global Headwinds Persist

Tariff Fallout:
United States imposed a 27.5% tariff on UK/EU vehicle imports from April 2025, causing JLR’s Q1FY26 wholesale volumes to plummet by 10.7% YoY to 87,286 units, and inflicting a GBP 254 million hit from a payment lag.

Domestic Contribution Erodes:
India domestic dispatches slid 9.1% YoY to 297,701 units as retail market sentiment weakened, and volumes in models below Rs 1 million saw a 15% drop, triggering aggressive discounting.

Product Mix Supports Premiumization:
A record-high average realization of GBP 76,000 per vehicle was attained at JLR, with premium models like Range Rover, Range Rover Sport, and Defender constituting 77% of revenue.

EV and Portfolio Expansion: Accelerating New Growth Engines

EV Strategy on Fast Track:
TML expects its EV mix to rise to 17% in Q2FY26, propelled by festive demand and new launches. Notably, the Harrier EV’s debut saw day-one bookings of roughly 10,000 units, underlining strong market acceptance.

Upcoming Launches & Portfolio Tie-Ups:
A strategic acquisition of Iveco’s automotive business (excluding defense) for EUR 3.8 billion will expand TML’s reach to premium truck segments in Europe and Latin America. The merger is targeted to close by FY26, funded 60-70% through debt and the remainder through internal accruals and monetization of a 4.7% Tata Capital stake.

Technological Leap:
The acquisition also aims to bring cutting-edge ADAS and software-defined vehicle (SDV) capabilities and strengthen TML’s global talent base.

Operational Resilience: Commercial Vehicles Drive Margin Stability

Commercial Vehicle Upside:
CV margins improved YoY by 60 bps to 12.2% thanks to richer product mix and stronger exports. Tata’s domestic CV retail market share nudged up by 50 bps to 36.1%. Ace Pro EV—billed as the most affordable small commercial vehicle EV—was launched in 10 cities and received robust market validation.

Supply Chain Management:
Despite sectoral headwinds, Tata Motors managed rare earth magnet supply critical for near-term EV production and saw positive trends in CNG model expansion.

Investor Guidance: Key Forecasts and Valuation Benchmarks

Growth Outlook:
Management projects single-digit growth for passenger and commercial vehicles in FY26, with Q2FY26 expected to rebound off a low base. The company’s refreshed Altroz and Tiago, alongside Sierra EV/Harrier EV launches, are forecast to reclaim hatch and UV market share.

Financial Estimates:
DevenChoksey has trimmed its FY26E/FY27E EBITDA projections by 10.4% and 6.5%, respectively, anticipating continued JLR margin pressures and subdued domestic ask. SOTP valuation methodology yields a target of Rs 722 per share, accounting for sector multiples and the value of Tata Technologies.

Rating Table Over the Last 12 Months:

Peer Comparison: Tata Motors Versus Rivals

Key Levels and Takeaways for Investors

Current Price: Rs 685
Target Price: Rs 722
Potential Upside: 5.4%
Recommendation: Accumulate

Tata Motors presents a moderate accumulation opportunity for investors prepared to ride out near-term volatility. With ongoing product innovation, strategic global expansion, and an ambitious EV roadmap, the company offers visible growth levers beyond cyclical headwinds.