Tata Motors up 6% after Q1 beat; analysts see demand, margin upside

Tata Motors share price: Shares of commercial vehicle maker Tata Motors surged more than 6 per cent in morning trade on Thursday after the company reported a strong June quarter performance, prompting Nomura to upgrade the stock to ‘Buy’ from ‘Neutral’.

 

The stock opened nearly 3 per cent higher at ₹470 and climbed to an intraday high of ₹485 on the National Stock Exchange (NSE).

 

At 9:40 AM, the stock was trading 4.6 per cent higher at ₹478, retaining most of its early gains. Over 7 million shares changed hands on the NSE in the first 25 minutes of trade, data showed.

 

 

In comparison, the benchmark Nifty 50 index was down 0.39 per cent at 24,340. Tata Motors was the top gainer on the Nifty Next 50 index, of which it is a constituent.

 

On Wednesday, Tata Motors reported an 83 per cent jump in consolidated net profit to ₹2,556 crore in Q1FY27, led by a mark-to-market gain on investments in Tata Capital Ltd. The company had posted a consolidated net profit of ₹1,397 crore in the corresponding period of the last fiscal year.

 

Its consolidated total revenue from operations stood at ₹20,667 crore in the quarter as against ₹17,324 crore in the year-ago period.

 

Ebitda increased 9 per cent Y-oY to ₹2,253 crore, while Ebitda margin stood at 11.6 per cent.

 

The company said that vehicle wholesales stood at 1,08,700 units in Q1, reflecting a growth of 26 per cent Y-o-Y. The company added that the Iveco acquisition is in the final stage, with only one approval pending. 

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Tata Motors stock: Nomura uprades to 'Buy' 

 

Post Q1 results, brokerage firm Nomura has upgraded its rating on Tata Motors to 'Buy' and raised the target price to ₹554 from ₹402. The target implies an upside of nearly 22 per cent from the previous close.

 

The brokerage’s bullish view follows a stronger-than-expected Q1FY27 performance. Nomura said that Tata Motors' 1Q Ebitda was ahead of estimates and that the company reported strong performance across segments. The brokerage sees further improvement in margins with price hikes, adding that the CV outlook appears to be brighter now.

 

The brokerage expects healthy double-digit medium and heavy commercial vehicle (MHCV) growth in Q2, while highlighting market share gains due to its new range of trucks. For LCVs as well, demand is stronger, and TMCV is likely to benefit from a strong focus on EVs and the export order book. 

 

The company took a 2.5 per cent price hike in July, which the brokerage expects to support margins from here on. 

 

Given the improved outlook, Nomura estimates TMCV’s FY27/ FY28/ FY29 MHCV growth at 10 per cent/ 5 per cent/ 5 per cent and raised LCV estimates by around 20 per cent for FY27 and FY28. It estimates Ebitda margins at 12.8 per cent/ 13.9 per cent/ 14.1 per cent for FY27/ FY28/ FY29 (25bp/60bp higher for FY27/28). 

 

Overall, the brokerage has raised FY27 and FY28 Ebitda estimates by 10-13 per cent.  Check - TOP GAINERS NSE | TOP LOSERS NSE 

 

Tata Motors: JM Financial retains 'Buy' 

 

Analysts at JM Financial have also shared a constructive view on Tata Motors post quarterly earnings. The brokerage has maintained 'Buy' rating on Tata Motors with a target of ₹353. The target implies an upside of nearly 13 per cent from the previous close. 

 

The brokerage expects 77.5 per cent exports volume growth in FY27 as Indonesian order deliveries ramp up. The brokerage said that multiple data points collectively signal continued demand momentum for the CV segment. However, for the demand segment, diesel prices amid the West Asia conflict would be a key variable to monitor going forward. 

 

The brokerage has revised topline by 2.5 per cent and +3.5 per cent for FY27 and FY28 on strong domestic demand coupled with export outperformance.

 

Considering Q1FY27’s margin outperformance and pricing action in Q2FY27, JM Financial has revised FY27 Ebitda by 30bps to 12.3 per cent.

 

Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.