Tata Motors hits over 5-month high; gains 10% in 9 days on positive outlook

Shares of Tata Motors hit an over five-month high of Rs 484.25 as they gained 2 per cent on the BSE in Thursday's intra-day trade. The stock has surged 10 per cent in the past nine trading days driven by positive demand outlook.

The stock of the automobile company was trading at its highest level since February 23, 2022. In the past three months, it has outperformed the market by surging nearly 25 per cent as against a 10 per cent rise in the S&P BSE Sensex.

Earlier this week, Tata Passenger Electric Mobility Ltd (TPEML), a Tata Motors subsidiary bought Ford India's manufacturing plant situated at Sanand, Gujarat, including entire land and buildings, vehicle manufacturing plant along with machinery and equipment for a consideration of Rs 725.7 crore. The acquisition, the company said, will accelerate the growth and development of the Indian auto industry by taking a progressive step forward towards building a future ready Atmanirbhar Bharat.

Separately, Tata Motors believes the Commercial Vehicle (CV) industry is poised for further growth on the back of increased activity in road construction, mining and improved infrastructure spending.

"The supply situation continues to show gradual improvement. Despite uncertainties, business sentiments continue to be positive with increasing fleet utilisation levels and freight rates. Sharp commodity inflation, however, continues to remain a challenge," Tata Motors said in its FY22 annual report.

The Passenger Vehicles (PV) business is also expected to deliver strong improvement in margins and profitability in  fiscal 2022-23 (FY23). The business will continue to step-up new product launches and enhance capacities to cater to increasing demand. Despite significant step-up in investments, the PV business is expected to remain self-sustaining, it said.

As regards Jaguar Land Rover (JLR), the company expects the global semiconductor shortage to gradually improve in FY23. It also expects volumes to improve progressively after Q1FY23, and targets to achieve a 5 per cent EBIT margin and over £1 billion positive free cash flow in FY23.

"Our medium- and longer-term financial targets under the Reimagine strategy, underpinned by the Refocus transformation programme, remain unchanged, including improving EBIT margins to 10 per cent or more by FY26 and improving cash flow to achieve near zero net debt in FY24," Tata Motors said.

Analysts at ICICI Securities expect the stock to maintain positive bias and head towards Rs 509 levels in the coming weeks as it is the confluence of the high of February 2022 and the 80 per cent retracement of the entire decline (Rs 536-367).

The auto space has been outperforming in the last few months and has recently generated a breakout above the multi-year consolidation. Within the Auto space our preferred pick is Tata Motors which we expect to outperform going forward. The stock has recently generated a breakout above the supply line joining highs of April & July 2022 and is seen forming a higher base above the same signaling strength and continuation of the up move, the brokerage firm said in its momentum picks' report.