Tata Motors hits highest level since Feb 2017 on demand recovery hope

Shares of Tata Motors hit an over four-year high of Rs 536.50, up 3 per cent on the BSE in Wednesday's intra-day trade, having gained 6 per cent in the past two days on demand recovery hope. The stock of the Tata Group commercial vehicles maker was trading at its highest level since February 2017. It surpassed its previous high of Rs 532.40, touched on October 14, 2021.

While announcing September 2021 (Q2FY22) results, Tata Motors had said that the demand remains strong for Jaguar Land Rover (JLR) and India passenger vehicle (PV) while commercial vehicle (CV) demand is improving gradually. "Semiconductor issues and commodity inflation will continue to impact the near term and we are doing our best to manage them. The performance is expected to improve gradually starting in H2 as both the supply chain and the pandemic situation improves," the company said.

According to analysts, Tata Motors should witness a gradual recovery from Q2FY22 lows as supply-side issues ease and commodity headwinds stabilize (for the India business). "It would gain from the triple benefits of a macro recovery, company-specific volume/margin drivers, and sharp improvement in free cash flow (FCF) and leverage in both JLR as well as the India business," said analysts at Motilal Oswal Financial Services.

"We expect 18 per cent/19 per cent CAGRs in India CV/PV volume over FY22-24E, driven by improving macros, new products and marketing efforts. Focus remains on E-PVs, with investments of US$ 2 billion toward new products, capacity expansion, localization and charging infra," said those at Emkay Global Financial Services.

Analysts at Kotak Institutional Equities, too, believe the domestic electric vehicle (EV) business can be the game changer for the company given strong government push amid favorable policies (PLI for advanced chemistry cells and automobiles and FAME-II scheme) and growing consumer demand for greener solutions.