Tata Motors stock rises 2%; Brokerages upbeat on outlook post analyst meet

Overall, Tata Motors is targeting strong double-digit margins and aims to generate healthy positive FCF going ahead.

Shares of Tata Motors rose 2 per cent to Rs 1,010 on the BSE in Wednesday’s intra-day after brokerages upgraded the stock post Tata group-conducted analyst day for its Indian business on Tuesday. Overall, Tata Motors is targeting strong double-digit margins and aims to generate healthy FCF (Free Cash Flow) going ahead.

The stock had hit a record high of Rs 1,065.60 touched on March 5. It has recovered 18 per cent from its previous week’s low of Rs 855.45 hit on June 4.

However, at 02:27 pm; Tata Motors erased its partial intra-day gain and was up 0.24 per cent at Rs 989.50, as compared to 0.34 per cent rise in the BSE Sensex.

The analyst day event, the company showcased its capability across different powertrain technologies especially zero emission products, readiness with respect to new tech enabled vehicles and serious intent to grow the non-vehicle business. It expects commercial vehicle (CV) demerger to be largely complete by July 2025 with capex spend on the CV side pegged at ~2-4 per cent of sales with sustainable FCF expected at ~6-8 per cent and strong RoCE matrix.

In the passenger vehicle (PV)/electric vehicle (EV) business, Tata Motors plans to launch 5-6 new models over next 2 years across alternate powertrains. Investments in the EV business are expected to be Rs 16,000 crore-18,000 crore over next 6 years, largely towards developing new products, powertrain, regulatory changes etc.

Overall, Tata Motors targets 200 bps market share gain in the PV segment by FY26 led by these launches. In respect of CV business, industry is expected to grow at single-digit during FY25. Tata Motors is targeting strong double-digit EBITDA margin for its CV business and expects PV-EV business to be EBITDA breakeven (ex. PLI) in the medium term. Net-cash position in domestic business drives comfort.

Analysts at JM Financial Institutional Securities maintain BUY with Mar’25 SoTP of Rs 1,200 (standalone / Jaguar Land Rover (JLR) valued at 12x /3x EV/EBIDTA). Slowdown in key global markets remains a monitorable, the brokerage firm said.

On an overall basis, it talked about further strengthening the already profitable Indian business with strong ambition to grow ahead of industry in a sustainable way. ICICI Securities have a positive view on the company and it offers a good portfolio play.

Motilal Oswal Financial Services (MOFSL) expects JLR margins to remain stable over FY24-26, given rising cost pressure as it invests in demand generation, normalizing mix, and EV rampup, which is likely to be margin-dilutive. Even in India business, both CV and PV businesses are seeing moderation in demand.

Improved growth prospects in CVs prompt an upgrade in our target multiple to 12.5x, leading to revised SoTP-based target price of Rs 1,050/share and upgrade to ADD (Rs 950 TP, REDUCE earlier); our estimates are unchanged, said analysts at Emkay Global Financial Services.

While there is no doubt that Tata Motors delivered an extremely robust performance across its key segments in FY24, the above-mentioned headwinds could hurt its performance going ahead. The stock trades at 17x/14.6x FY25E/FY26E consolidated EPS and 5.9x/4.9x EV/EBITDA, MOFSL said. It reiterates Neutral with FY26E SOTP-based target price of Rs 955 per share.