Nomura initiates TMCV with 'Buy' as India truck cycle shows early revival

Nomura expects TMCV's India business to be a key beneficiary of the anticipated recovery, supported by its dominant 46 per cent market share in the domestic MHCV segment in FY25.

Japanese brokerage Nomura has initiated coverage on Tata Motors Commercial Vehicles (TMCV) with a ‘Buy’ rating and a target price of ₹481, citing improving fundamentals and an emerging upcycle in India’s commercial vehicle (CV) market.

 

The brokerage sees nearly 20 per cent upside from current levels following the recent demerger of Tata Motors’ CV business.

TMCV well-placed to benefit from domestic MHCV recovery

Nomura expects TMCV’s India business to be a key beneficiary of the anticipated recovery, supported by its dominant 46 per cent market share in the domestic medium and heavy commercial vehicle (MHCV) segment in FY25. The brokerage forecasts MHCV volume growth of 10 per cent year-on-year (Y-o-Y) in FY26 and FY27, followed by 5 per cent growth in FY28.

 

Improving operating leverage, benign commodity prices and reduced discounting are expected to drive Ebitda margin expansion to the 12-13 per cent range over FY26-FY28, Nomura said.

 

Iveco acquisition a near-term drag, long-term value positive

 

While the India CV business underpins near-term growth, Nomura flagged that TMCV’s €3.8 billion acquisition of Iveco’s truck business comes at a cyclical low point. Iveco is currently passing through a downcycle, with growth recovery expected only from FY27 onwards.

 

However, Nomura believes the acquisition offers long-term strategic value, with potential synergies across the supply chain, product development and access to new markets. In its sum-of-the-parts (SoTP) valuation, the brokerage assigns a 12x EV/Ebitda multiple to TMCV’s CV business and values Iveco at 4x EV/Ebit, at the lower end of its global peer range given its relatively lower margins and scale.

 

Nomura’s earnings per share (EPS) estimates for TMCV are 12-11 per cent ahead of consensus for FY27-FY28.  ALSO READ | HDFC Bank hits over 9-month low; stock down 8% so far in January

Ashok Leyland remains preferred CV play

Among listed peers, Nomura reiterated Ashok Leyland as its preferred play on the domestic CV upcycle, maintaining a ‘Buy’ rating with a target price of ₹196.

 

The brokerage highlighted Ashok Leyland’s 31 per cent MHCV market share and its positioning as a pure-play proxy to rising industry demand. Nomura now expects Ashok Leyland’s MHCV volumes to grow by around 10 per cent annually over FY26-FY28, higher than earlier estimates, aided by stronger export momentum.

 

Ebitda margins are projected to expand into the mid-teens, driven by stable input costs, lower incentives and operating leverage, supporting an estimated 18 per cent earnings CAGR over FY26-FY28.  ALSO READ | Emkay sees Dixon Tech selloff overdone; long-term growth drivers intact

India MHCV cycle turning favourable

Nomura’s positive stance is anchored in an improving outlook for the India MHCV industry. After growing at a modest 4-5 per cent pace in recent years, the sector is expected to deliver stronger growth of 8 per cent in FY26 and 10 per cent in FY27.

 

Rising freight rates have materially improved fleet operator profitability, while a potential GST cut could boost affordability and stimulate demand. Additionally, the average age of trucks on Indian roads is estimated at around 10 years, well above the normal replacement cycle of seven years, pointing to latent replacement demand.

 

The brokerage also expects upcoming regulatory changes to push up vehicle prices, which could trigger pre-buying demand in FY27-FY28. Early signs of recovery are already visible, with domestic MHCV volumes posting a sharp Y-o-Y rise in November 2025.

 

On infrastructure developments, Nomura said the near-complete commissioning of the Dedicated Freight Corridor is unlikely to materially impact overall MHCV demand, as non-bulk cargo continues to rely heavily on road transport.

 

That said, Nomura believes India’s CV sector is entering a favourable phase, with TMCV and Ashok Leyland well positioned to benefit from rising volumes, improving margins and stronger earnings visibility.      Disclaimer: The views or investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.