Analysts Bullish On Tata Motors’ Domestic Business Turnaround; Stock Gains

Shares of Tata Motors Ltd. gained as analysts raised price targets on the automaker, citing an increase in market share for passenger and commercial vehicles and focus on battery-powered cars, among others.

Besides, the company reiterated its improved profitability and positive free cash flow targets for commercial and passenger vehicle businesses and its ambitions to turn net debt free by FY24, Macquarie said in its report citing Tata Motors’ investor call.

The maker of the Nexon compact sports utility vehicle is already seeing a turnaround in its domestic passenger vehicle business. It’s also eyeing double-digit market share on account of improving demand.

That may have also prompted the analysts to maintain their bullish investment recommendation on the automaker. Of the 34 analysts tracking Tata Motors, 18 recommend a ‘buy’, six suggest a ‘hold’ and 10 have a ‘sell’ rating, according to Bloomberg data.

The stock was trading 5.4% higher as of 11:30 a.m. on Tuesday at Rs 320.9 apiece.

Here’s what brokerages have to say about Tata Motors...

Prabhudas Lilladher

• Maintains ‘reduce’ rating, hikes target price from Rs 231 to Rs 255 apiece.
• Sharp focus on execution in commercial vehicle and passenger vehicle business to drive strong operating performance.
• The domestic medium and heavy commercial vehicle outlook is positive where industry is expected to grow 60- 65% in FY22.
• Concerns on JLR scale remain.
• Target to sustain first-mover advantage by offering complete ecosystem in electric vehicles.

Motilal Oswal

• Maintains ‘buy’ rating, hikes target price from Rs 257 to Rs 390 apiece.
• Passenger vehicle business builds on success by expanding market coverage, breakeven in sight.
• Cyclical recovery underway in commercial vehicle business; targeting double-digit margin.
• Recovery in JLR volumes in FY21 to be driven by market recovery and ramp-up in newly launched Evoque and Defender.
• Management is targeting double-digit market share and leadership in SUVs and EVs.

Emkay Global

• Maintains ‘buy’ rating, raises target price from Rs 305 to Rs 355 apiece.
• Aggressive product pipeline to aid performance in passenger vehicle.
• Domestic MHCV volumes to grow strongly at 49% CAGR over FY21-23E; market share to recover to 50%.
• Gross margin is expected to remain under pressure due to increasing commodity prices in the near term.

Macquarie

• Maintains ‘buy’ rating, raises target price from Rs 345 to Rs 400 apiece.
• Management reported positive demand trend in commercial vehicles.
• Company has achieved material cost reduction of 4-6%, and 25% reduction in cash costs per day.
• Management targets double-digit Ebitda margin in commercial vehicle in the next three years.
• Eyes double-digit market share in passenger vehicles.
• Expects EV penetration of 10% over the next five years, increased market share in EVs to 72%.