Tata Motors CV Q2 Preview: Profit Growth Seen Up to 44%

Tata Motors Commercial Vehicles could report adjusted profit growth of up to 44.3% year-on-year for the September quarter of FY27, with brokerage forecasts pointing to roughly 43% growth in vehicle volumes. The Economic Times Markets reported on October 22 that JM Financial and Motilal Oswal Financial Services expect a sharp rise in revenue, but disagree on how much of that growth will reach the bottom line.

These are forecasts ahead of the results, not company-announced earnings. The central issue is whether higher sales and price increases can compensate for rising input costs.

Revenue forecasts converge; profit expectations differ

JM Financial projects revenue of Rs 24,218.4 crore, up 43.6% from a year earlier. Motilal Oswal Financial Services, or MOFSL, estimates net operating income of Rs 24,638.1 crore, representing growth of 45.4%.

The gap is wider on adjusted profit after tax. JM Financial expects Rs 1,940.2 crore, an increase of 44.3%, while MOFSL forecasts Rs 1,690.1 crore, up 25.7%. Both use a year-earlier adjusted profit figure of Rs 1,345 crore.

Vehicle sales underpin both forecasts. JM Financial estimates quarterly volumes at 1,35,114 units, up 42.7% year-on-year, while MOFSL projects total India volumes of 1,37,339 units, up 43%. MOFSL expects light commercial vehicle volumes to rise 53.1%, compared with 31% growth for medium and heavy commercial vehicles.

Input costs put margins at the centre of the results

JM Financial forecasts earnings before interest, tax, depreciation and amortisation, or EBITDA, of Rs 2,843.4 crore, up 36.9% year-on-year, with an EBITDA margin of 11.7%. MOFSL projects EBITDA of Rs 2,583.4 crore, up 18%, and a lower margin of 10.5%.

MOFSL's forecast incorporates a net price increase of 2.5% implemented since July. Even so, it expects raw material expenses to absorb 72.5% of sales, against 70.7% in the preceding quarter. That cost burden helps explain why its profit forecast is more cautious despite its higher revenue estimate.

Some realisation and sequential-margin comparisons in the published account do not reconcile with the figures listed alongside them. Those comparisons are not used here; the brokerage forecasts above remain attributed estimates rather than independently checked financial results.

MOFSL remains cautious on the full year

MOFSL's full-year forecasts show why a strong September-quarter growth rate may not settle concerns about profitability. It expects FY27 revenue to increase 12.7%, but EBITDA to fall 3% to Rs 9,922.3 crore and adjusted profit to decline 2% to Rs 6,427.7 crore.

The brokerage has reduced its earnings-per-share estimates for FY27 and FY28 by 10% and 3%, respectively. It retains a Neutral rating and a target price of Rs 422, compared with the Rs 415 market price cited in the report. That cited price is not a live market quote, and the target is a brokerage assessment, not an assured return.

Management commentary on domestic demand, the durability of volume growth, vehicle mix and input costs will therefore be important alongside the headline earnings figures. The two brokerages' forecasts make pricing effectiveness and operating margins the main points of disagreement.