Tata Motors stock outlook: Hits new 52-week high post Q4 results; will it rise more as auto sector grows?

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Tata Motors shares have been hitting new highs for the last few sessions, and the stock gained today as well, with shares rising nearly 1%. The surge in stock is primarily due to the strong results, wherein the company reported a net profit of Rs 5,408 crore in Q4FY23l, swinging from a net loss of Rs 1,033 crore in Q4FY22. The reason behind the stellar Q4 results was price hikes and strong demand for cars in its luxury Jaguar Land Rover (JLR) stable as well as for commercial trucks. Apart from the results, the company’s recent investors’ meet further helped the stock to touch new highs. Most of the analysts turned bullish on Tata Motors and now expect it to gain as much as 24%. 

Tata Motors shares have jumped 43% year-to-date compared to a 16.5% rise in the Nifty Auto index and a 3% increase in the benchmark Nifty 50 index. Going ahead, analysts believe that the Automobile sector will see steady improvement in volume but would remain below peak due to supply issues and slower demand recovery owing to uncertain geopolitical situations and depreciating currency. Meanwhile, easing commodity and fuel prices would support the industry. Key monitorable events over the next 1-2 months are heatwave, climatic conditions and further development on monsoon & El Nino, which remains a key overhang at present.

Automobile industry to witness high single-digit volume growth in FY24

“Despite a healthy FY23 on a low base, ongoing global geopolitical issues and depreciating currency continue to keep pressure on economies and elevate inflation levels across countries. This has been limiting industry-wide recovery at the moment, particularly export volume to a greater extent. We expect the automobile industry to witness high single-digit volume growth and margin improvement of 100-200bps in FY24. However, we expect M&HCVs to peak out in FY24E with marginal growth and would fall in FY25E,” said analysts at Reliance Research.

Should you buy, sell or hold Tata Motors stock?

ICICI Direct: Buy – CMP: Rs 561 – Target Price: 700 (24.7% upside)

“We maintain BUY on the stock tracking profitability at the helm in domestic CV & PV business (including EVs), JLR’s progressive volume recovery on the anvil, reiterated commitment towards EVs & healthy FCF generation,” said analysts at ICICI Direct Research.

Motilal Oswal: Buy – CMP: Rs 561 – Target Price: 650 (15.8% upside)

“TTMT should witness a healthy recovery as supply-side issues ease (for JLR) and commodity headwinds stabilize (for the India business). The stock trades at 19.2x/16.7x FY24E/FY25E consolidate P/E and 4.9x/4.2x EV/EBITDA,” said analysts at Motilal Oswal.

Nuvama: Buy – CMP: Rs 561 – Target Price: 645 (14.9% upside)

“We retain ‘BUY/SO’ with a SoTP-based value of Rs 645/share, based on 2x FY25E EV/EBITDA for JLR, 11x FY25E EV/EBITDA for the India CV business and Rs 108/share for the India E-PV business, based on 20% discount to the transaction value,” said analysts at Nuvama Institutional Equities.

JM Financial: Buy – CMP: Rs 561 – Target Price: 625 (11.4% upside)

“TTMT aspires to reach double-digit EBITDA margin for both its CV and PV business and expects EV business to be EBITDA breakeven (ex. PLI) in the medium-term. Competition in the PV segment and a slowdown in key global markets are the key risks,” said analysts at JM Financial.

Elara Capital: Accumulate – CMP: Rs 561 – Target Price: 615 (9.6% upside)

“While CV profitability is expected to remain healthy, we remain watchful of volumes as it nears its cyclical peak (FY19 peak to be reached in FY24 with a 10% margin over FY24-5E). We are impressed by the EV customer profiles (~23% first-time & ~24% women buyers). We await details on JLR at its analyst meeting on 12 July in the UK,” said analysts at Elara Capital.

Prabhudas Lilladher: Buy – CMP: Rs 561 – Target Price: Rs 605 (7.8% upside)

“We remain positive on Tata Motors given (1) JLR’s volume ramp-up resulting in strong revenue, profitability and FCF (aided by high order book), 2) the CV segment (on the domestic side) benefitting from ongoing upcycle, operating leverage and tailwinds from lower commodity costs & lower discounting and (3) strong market share in PV segment (13.5% vs 8% in FY21) led by revamped portfolio, rising SUV share and rising EV penetration. We expect revenue/EBITDA CAGR of 12%/32% over FY24/25E,” said analysts at Prabhudas Lilladher.


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