Healthy outlook, upcoming Tata Tech listing lifts Tata Motors to new high

Tata Motors is looking at a strong second half (H2FY24E) and beyond due to improvements in all 3 business verticals.

Shares of Tata Motors and Tata Motors (Differential Voting Rights) gained 3 per cent to hit their respective record highs on the BSE in Tuesday’s intra-day trade ahead of listing of its subsidiary Tata Technologies (Tata Tech). Further, government’s continued thrust on infrastructure development, the management of Tata group automobile major remains optimistic about the overall commercial vehicle (CV) demand in FY2023-24 (FY24) despite near term challengers on interest rates, fuel prices and inflation.

Tata Motors hit a new high at Rs 690.95, surpassing its previous high of Rs 687.55 touched on November 17. Tata Motors DVR too hit a fresh record high of Rs 471.60, thus overtook its earlier high of Rs 466.95 touched on November 20. In comparison, the S&P BSE Sensex was down 0.05 per cent at 65,934 at 11:31 AM.

The Rs 3,042.5 crore IPO of Tata Tech, which provides engineering and product development digital services, was subscribed 69.43 times on the final day of subscription on Friday, driven by remarkable participation from institutional buyers.

The category for qualified institutional buyers (QIBs) was subscribed a mammoth 203.41 times, while the part meant for non-institutional investors attracted 62.11 times subscription. The quota for retail individual investors (RIIs) was subscribed 16.50 times.

Meanwhile, as per media sources, Lithium-Ion battery prices fell 14 per cent YoY to US$139/KwH in 2023 vs. US$161/KwH primarily driven by drop in key raw material prices. Tata Motors did indicate drop in battery prices boosting its profitability in coming quarters. ICICI Securities said it expect such a trend to further acceleration EV adoption domestically as well as globally.

Tata group management said the company will aim for higher realisations and cost savings to secure double-digit EBITDA margins for FY24 and improve the performance across all business verticals.

Looking ahead, the company expects the demand for electric vehicles (EV) to rapidly increase as more options are made available to customers and as support from a swiftly growing and improving ecosystem strengthens.

Tata Motors is looking at a strong second half (October to March) H2FY24E and beyond due to improvements in all 3 business verticals. Jaguar Land Rover (JLR) will see higher volumes, and an improved product mix leading to a higher EBIT margin guidance for FY24E, according to analyst at K R Choksey Shares and Securities.

Tata Motors- CV business will continue to see double-digit EBITDA margins backed by strong realizations. The Tata Motors-passenger vehicle (PV) business margins are likely to improve due to new product launches done recently and improvements in EV margins. With all 3 businesses firing in the right direction, Tata Motors is well poised to deliver a solid performance going ahead, the brokerage firm said with ‘buy’ rating on the stock and target price of Rs 784 per share.