Despite a 2110% YoY increase in Q2 profit, Tata Motors PV shares plummet 7%. Why is the fall occurring?

Despite reporting a 2,110% year-over-year (YoY) increase in net profit, shares of Tata Motors Passenger Vehicles (TMPV) fell more than 7% in early trading on Monday, November 17, as the performance of its premium division, Jaguar Land Rover, was taken into consideration.

Despite reporting a 2,110% year-over-year (YoY) increase in net profit, Tata Motors Passenger Vehicles (TMPV) shares plummeted more than 7% in early trading on Monday, November 17, as the company's luxury division, Jaguar Land Rover, struggled.

Brokerages claim that even outside of the hacking incident, JLR is having serious difficulties in its major markets, even though the India PV business performance is in line with expectations.

For the recently demerged TMPV stock, which houses Tata Motors' passenger car, electric vehicle, and JLR companies, analysts generally suggested a "reduce" or "sell" recommendation.

The price of TMPV shares fell 7.2% from its previous closing price of ₹391.60 to the day's low of ₹363.15 on the BSE.

Q2 Results for Tata Motors
A one-time notional gain of ₹82,616 crore was the main driver of Tata Motors Passenger Vehicles' astounding 2,110% year-over-year increase in profit to ₹76,170 crore. The company really posted a loss of ₹6,368 crore without this extraordinary item, as opposed to a profit of ₹2,597 crore in Q1 FY26 and ₹3,056 crore in the same quarter last year.

To ₹72,349 crore, overall revenue fell 13.5% year over year.

The business claims that while domestic operations stayed stable and improved after GST reductions, a large cyber incident at JLR had a negative impact on performance.

After a hack momentarily stopped production, Jaguar Land Rover reduced its guidance and experienced a £559 million quarterly loss.

The Defender manufacturer has already reduced its estimate this year due to tariff-related uncertainty, and now anticipates an operating margin of 0% to 2% in fiscal 2026, down from an earlier target of 5% to 7%.

In contrast to its previous estimate of breaking even, it predicts a negative free cash flow of £2.2 billion to £2.5 billion ($3 billion to $3.4 billion) for fiscal 2026.

Although production has now returned to normal in November, JLR management has stated that Q3 would also see some effects from the cyber event.

Should I buy, sell, or retain Tata Motors shares?

Brokerage According to Motilal Oswal, the main reason for concern is that demand for JLR is still low in important areas like China, the US, and Europe. As a result, VME is probably going to be high, at least for the foreseeable future.

In light of this, the brokerage reduced its EBIT margin projections for JLR to 2% for FY26E and anticipates an improvement to roughly 5% by FY28E (formerly estimated at 6.5%). Brokerage MOSL began covering the freshly demerged Tata Motors PV shares with a "Sell" rating and a SoTP-based TP of ₹312 per share due to the serious difficulties at JLR.

The Tata Motors PV stock was also given a "Reduce" rating by Nuvama Institutional Equities, with a target price of ₹385 in September 2027.

Over FY25–28E, it is projecting a moderate revenue/EBITDA CAGR of 7%/3%. Due to the discontinuation of Jaguar models and low demand in important countries, JLR anticipates a flat volume CAGR during this time. However, it projects that between FY25–28E, India's PV revenue will increase at a CAGR of 11%.

Due to poor operating performance, ICICI Securities downgraded the stock from "Add" to "Hold," with a revised SoTP-based objective of ₹375 (formerly ₹466).

Given the difficult demand environment, JLR's near-to-medium term outlook is still muted. A dire demand scenario is reflected in the likely continuation of high VME spending and the sluggish and gradual passthrough of US tariffs over a period of 15 to 18 months.