Motilal Oswal trims price target on TaMo, sees 4% downside, Here's why

Domestic brokerage firm Motilal Oswal Financial Services (MOFSL) has cut target price on Tata Motors to Rs 970 from Rs 1,000 as it believes the current market price already factors in most of the positives. It, however, has maintained 'neutral' rating on the stock.

It values the stock at 17 times/14.5 times financial year 2025 estimate/financial year 2026 estimate (FY25E/FY26E) consolidated earnings per share (EPS).

MOFSL said the revised price highlights expectations of stabilising growth in the near future due to moderate volume growth in domestic passenger and commercial vehicle industries, alongside ongoing weaknesses in the EU light vehicle sector.

 

Additionally, concerns arose as management refrained from providing guidance on the order book and free cash flow (FCF), practices they had previously engaged in, the Mumbai-based brokerage highlighted. 

Notably, Tata Motors stock witnessed a slight setback in the past month, with its stock dipping approximately 2 per cent amid a period of consolidation following a notable rally. 

While the stock soared past the Rs 1,000-mark for the first time on March 5, hitting a 52-week high of Rs 1,065.60, it has since retreated about 6 per cent to hover around the Rs 1,000-mark.

The downturn coincides with lacklustre growth in auto sales, with a 3.14 per cent increase year-on-year (YoY) in March, as reported by the Federation of Automobile Dealers Associations (FADA). 

The automotive sector displayed mixed performances across segments, with passenger vehicles (PVs) maintaining their positive momentum, in March. However, commercial vehicles (CVs) and the tractor segment remained subdued, attributed to a high base and the impact of election year dynamics. Dispatches across segments overall fell below market expectations, with the exception of CVs, according to a note by brokerage firm BP Wealth.

Meanwhile, Jaguar Land Rover (JLR), a subsidiary of Tata Motors, reported fourth-quarter sales that were in line with street estimates, with wholesales reaching 1.10 lakh units, according to brokerage firm Motilal Oswal. 

JLR's retail sales faced challenges, with a 9 per cent drop in China and a 2 per cent decline in Europe, though Jaguar wholesales surged by 39 per cent annually and LR wholesales rose by 14 per cent.

As of 10:09 am, shares of Tata Motors were trading 0.35 per cent higher at Rs 1,011.75 per share.