Tata Motors Gets ‘Overweight’ Rating From JPMorgan On ‘Self-Help’ Story
JPMorgan is 'overweight' on Tata Motors, setting a price target of Rs 630 apiece—a 26% upside from current levels.
JPMorgan is ‘overweight’ on Tata Motors Ltd., betting on the automaker’s “commitment to balance sheet deleveraging” and “structural strengthening of its businesses—India and Jaguar Land Rover”.
The maker of the Tiago and Safari can achieve its net zero debt target by FY24 by continuing to execute its “self-help” strategies, the research house said in a Feb. 16 note as it initiated coverage on the stock.
These strategies include:
Improving the mix towards the more profitable Land Rovers and rightsizing of costs in JLR to revive free cash flow.
Having model launch-led market share gains in India's passenger vehicle segment.
Strengthening its commercial vehicle leadership during a cyclical recovery.
Tata Motors, it said, also dominates the nascent electric vehicle segment—1% penetration in India—within passenger vehicles with an 80% market share. The company has announced a Rs 7,500-crore fundraise from TPG for its newly-formed EV subsidiary. The U.K.-based JLR, too, is improving in electrification.
JPMorgan has set a price target of Rs 630 apiece for Tata Motors, implying a 26% upside from current levels. In its bull case fair value, the stock could further reach Rs 783, a 57% upside, if Tata Motors continues to be a leader in passenger EVs in India and meets medium-term targets at JLR.
Separately, JLR in a statement said it has formed a multi-year strategic partnership with Nvidia to jointly develop and deliver next-generation automated driving systems plus artificial intelligence-enabled services. Starting 2025, all new JLR vehicles will be built on a Nvidia Drive software-defined platform.
JPMorgan also lists certain risks to its target price.
Continued chip shortages could delay a volume recovery and balance sheet deleveraging.
Slower than-expected recovery in Indian commercial vehicles and reversal of market-share gains in passenger vehicles due to failure of new models.
Higher-than-expected investments to meet electrification targets.
Shares of Tata Motors gained as much as 2.6% to Rs 511.5 apiece intraday, before closing 0.3% higher. The NSE Nifty 50 closed at 0.1% discount, in comparison.
Of the 34 analysts tracking Tata Motors, 26 recommend a ‘buy’ and four each suggest a ‘hold’ and a ‘sell’, according to Bloomberg data. The average of 12-month price targets implies a 15% upside.