Tata Motors surges 12% on brokerage upgrade, strong business outlook

Shares of Tata Motors rallied 12 per cent, hitting a fresh three-year high at Rs 376.4 on the BSE on Thursday on expectation of a strong business outlook.  The stock was trading at its highest level since April 2018. It surpassed its previous high of Rs 360.65 touched on June 15.

This came after brokerage Morgan Stanley upgraded Tata Motors to an overweight rating from equal-weight and raised its target price to Rs 448 from Rs 298 earlier.

“Tata Motors is seen more as a Jaguar Land Rover (JLR)/global luxury play, but we believe the incremental upside surprise will come from its Indian business. We expect 2022/23 to be strong for Indian autos and Tata’s Indian business, and with its lean cost structure, refreshed model portfolio and high leverage,” the brokerage said.

Morgan Stanley said it believes Tata Motors will see the highest operating and financial leverage gains. Besides, market share gains in the Indian passenger vehicle (PV) and commercial vehicle (CV) businesses could also alter it from a global luxury play to a global and India play. “In our bull case, Tata Motors reaches zero net debt by 2024, while India PV and CV multiples go close to peers, driving 84 per cent upside in the name,” the brokerage added.

Motilal Oswal Securities too maintains a ‘buy’ rating on Tata Motors with target price of Rs 400 per share. “Recovery is underway in all the three businesses of Tata Motors. While the India CV business would see cyclical recovery, the India PV business would witness structural recovery,” the brokerage said.

Meanwhile, Tata Motors Differential Voting Rights (DVR) shares also surged 8 per cent to Rs 193.25 on the BSE. The stock was trading at its highest level since May 2018. DVR shares are those that are permitted to be issued with differential voting and dividend rights.