India's Tata Motors climbs on recovery bets after upbeat JLR outlook

BENGALURU, Nov 3 (Reuters) - Shares of Tata Motors (TAMO.NS) rose as much as 4.6% on Friday, amid hopes of a turnaround after the Indian auto maker raised its luxury car unit Jaguar Land Rovers (JLR) margin outlook and reported its fourth consecutive quarter of profit.

The shares pared some of the early gains and were last up 2.7%. The stock is among the top gainers on the blue-chip Nifty 50 (.NSEI) and Nifty Auto (.NIFTYAUTO) indexes, which were up 0.7% and 1%, respectively as of 10:24 a.m. IST.

Easing supply-side issues that had hurt JLRs production and stabilising cost pressures that fuelled Tatas expenses in the domestic business will help the companys recovery, Motilal Oswal said.

Strong JLR sales are key to Tatas earnings as the British division accounts for two-thirds of its parents revenue.

\“(JLRs) revenue growth is likely to be driven by production ramp-up and the huge pending order book (168,000 units), particularly for high realisation and margin models,\” Nuvama Institutional Equities said in a note.

Tata Motors, Indias largest carmaker by revenue, upgraded JLRs full-year earnings before interest and taxes (EBIT) margin forecast to around 8% from 6% on Thursday.

Nuvama and Motilal Oswal each rate the stock \“buy.\”

With easing inflation and increased federal spending on infrastructure, Nuvama analysts expect domestic sales of its commercial vehicles to increase. Further, passenger vehicles will likely get a boost from the shift to electric models and marketing push, they said.

The automakers stock has climbed over 68% this year, outpacing the Nifty Auto indexs 27.7% climb.

($1 = 83.2350 Indian rupees)