Ambit starts coverage on Tata Motors CV with 19% upside target; here's why

Tata Motors Commercial Vehicles share price: Domestic brokerage Ambit Institutional Equities has initiated coverage on Tata Motors Commercial Vehicles (TMCV), the newly demerged commercial vehicle unit of Tata Motors, with a 'Buy' rating, citing its market leadership, sustained margins, and global expansion strategy. 

 

According to analysts, TMCV's profitability, pricing discipline, higher tonnage mix and cost measures imply margin upgrade potential. The company’s India CV revenue and Ebitda grew at 6 per cent and 7 per cent CAGR, respectively, during FY19–25, despite a 5 per cent decline in volumes and around a 10 per cent loss in market share. After the demerger, the company is pursuing global expansion aided by cost-competitive strength, tech maturity, and revenue, cost and capex synergies.

 

"TMCV trades at a 6 per cent discount to Ashok Leyland due to slower volume growth, LCV (light commercial vehicle) market share loss and passenger vehicle (PV) drag. Domestic CV recovery, scale, global optionality and profitability step-up offer re-rating potential, narrowing gaps with Ashok Leyland," the brokerage said.

 

Ambit expects TMCV's revenue and Ebitda to grow at a CAGR of 6 per cent and 7 per cent over FY25-28, respectively, on the back of high-margin and non-core revenues, mitigating cyclical risks. Analysts valued India TMCV and IVECO at 13.5x/2.5x 1-year fwd EV/Ebitda with a target price of ₹430 (24.5x FY27E P/E). The target indicates an upside potential of 19 per cent from the December 8, 2025, closing price of ₹360.35 on the NSE.

 

At 10:30 AM on Tuesday, December 9, the Tata Motors stock was trading almost flat at ₹360.15, compared to the previous session's close on the NSE. In comparison, the NSE Nifty50 was down 119.95 points or 0.46 per cent at 25,840.6 levels. The company's total market capitalisation stood at ₹1.32 trillion.  CATCH STOCK MARKET LIVE UPDATES TODAY

Here's why Ambit Institutional Equities is bullish on Tata Motors:

Market leader capturing CV recovery: Analysts at Ambit noted that TMCV holds a 35 per cent CV retail market share, led by over 31-tonne HGVs with more than 60 per cent share. Additionally, the MHCV segment remains crucial, accounting for 35 per cent of volumes but contributing 68 per cent of the revenue pool, making higher tipper demand positive. While LCV's weakness dragged share, product upgrades and a stronger network position TMCV for a gradual recovery.

 

Sustained margin and FCF momentum: Tata’s CV overhaul has supported a 7 per cent Ebitda CAGR between FY19 and FY25, with a 70 bps margin growth despite a 5 per cent decline in volumes. Higher GVW mix should boost ASPs and profitability, while margin-accretive non-core revenue streams help reduce cyclicality. Scale benefits, better mix and continued cost actions are expected to further strengthen margins.

 

TMCV is still below its FY19 volume peak, leaving room for recovery driven by size, market share gains and volume uptick. With pricing discipline, tight working capital, low capex and no legacy overhang, free cash flow (FCF) as a percentage of sales is expected to remain around 8.5 per cent, with RoCE above 25 per cent.

 

Stronger global platform: According to Ambit, the IVECO acquisition will expand TMCV’s total addressable market, creating a global platform with over ₹2 trillion in revenue and 545K units in volume. The combined entity would leverage TMCV’s cost-efficient manufacturing, IVECO’s R&D and technology, and complementary product portfolios. 

 

TMCV to trade closer to Ashok Leyland: Tata Motors’ revenue (7.7 per cent vs 5.7 per cent) and Ebitda CAGR (8.6 per cent vs 7.5 per cent) outperformed Ashok Leyland over FY18–25, with similar free cash flow conversion despite weaker volumes. Ambit valued TMCV at 13.5× EV/Ebitda for the CV business, 2.5× FY27E EV/Ebitda for IVECO, 20 per cent discount for listed subsidiaries, and 1× P/B for other investments.  Disclaimer: Target price and stock outlook has been suggested by Ambit Institutional Equities. Views expressed are their own.