InCred Equities starts coverage on Tata Motors with 'Add' as CV cycle turns

InCred Equities has initiated coverage on Tata Motors, citing an improving commercial vehicle (CV) business cycle that could support a sustained recovery in volumes and market share. The brokerage has assigned an ‘Add’ rating with a target price of ₹513, implying a 16 per cent upside, driven largely by an expected turnaround in the domestic CV demand cycle.

 

According to InCred Equities, the CV downcycle that played out over six quarters between April 2024 and July 2025 appears to be bottoming out. A key trigger for revival has been the GST rate cut implemented in September 2025, which has considerably improved the operating economics for small truck operators. Savings on tyres, lubricants and spare parts are expected to boost cash flows for small transporters, while a reduction in vehicle prices should lower payback periods. These benefits, retained within the reverse charge mechanism under the GST regime, are likely to translate into fresh demand for new trucks.

 

 

The brokerage expects the demand recovery to be led by small and medium truck operators, aided further by a rise in freight rates. Medium-term tailwinds such as easing interest rates and an improvement in the Index of Industrial Production (IIP) are seen supporting the recovery through FY28F. Thus, analysts at InCred Equities expect double-digit volume growth during this upcycle.

 

Tata Motors is viewed as well positioned to benefit from this demand revival, analysts said. The company had seen sharper market share losses during the downturn, particularly in trucks below 16 tonnes. However, with demand now expected to be driven by small transporters, InCred believes Tata Motors’ strong brand recall and wide product portfolio across tonnage segments provide it with a meaningful opportunity to regain lost market share.

 

On the recently announced Iveco transaction, InCred Equities notes that the leveraged buyout of Iveco’s industrial division for €3.8 billion, valued at around 6x FY25 free cash flow of the CV division, came as a surprise. While the brokerage acknowledges medium-term positives such as technology synergies, a broader engine portfolio and potential export benefits from India, it flags near-term concerns. These include the possibility of equity raising, EPS dilution and weak quarterly performance post-acquisition. 

 

Given the limited overlap with the Indian CV market, where Iveco’s premium high-tonnage trucks, buses and vans represent only a  small portion of total MHCV volumes, InCred has not assigned any valuation to Iveco in its estimates. It, however, believes the acquisition could initially account for around 10 per cent of Tata Motors’ stock price in CY26F.

 

Valuation-wise, the brokerage has valued Tata Motors’ standalone CV business at 12.5x one-year forward EV/Ebitda, at a 12 per cent discount to Ashok Leyland, translating into ₹489 per share. Subsidiaries are valued at ₹25 per share after applying a 20 per cent holding company discount, largely reflecting Tata Capital. 

 

Key downside risks, analysts said, include global challenges delaying Iveco’s turnaround and any renewed weakness in domestic truck demand.

 

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