Tata Motors share races 6% in 3 days as most brokerages upbeat on outlook

Tata Motors share price: Automobile giant Tata Motors share was in demand for the third consecutive session on Friday, December 27, 2024, as the stock soared up to 3.50 per cent to hit an intraday high of Rs 766.75 apiece.  Notably, the Tata Motors share has jumped 6.12 per cent in the last three sessions.  

 

However, at 1:15 PM, Tata Motors share was off highs and was trading 2.01 per cent higher at Rs 755.70 apiece. In comparison, BSE Sensex was trading 0.48 per cent higher at 78,852.90 levels.

 

The northward move in the Tata Motors share today came after domestic brokerage DAM Capital upgraded Tata Motors to ‘Buy’ from ‘Neutral’. However, it kept the target price unchanged at Rs 870 apiece, which reflects 17.4 per cent upside from the previous close (December 26) of Rs 740.80.

 

 

Analysts at DAM Capital anticipate a recovery in the automotive sector by FY26, driven by favourable macroeconomic factors, despite an expected near-term slowdown. 

"We expect recovery in FY26E due to favourable macros. Considering comfortable valuation, after a sharp correction, and a favourable risk-reward, we upgrade Escorts, Bajaj Auto, and Tata Motors to 'Buy', maintaining our estimates and target price," analysts at DAM Capital said, in a note. 

 

What do other brokerages say about Tata Motors?

 

A separate report by ICICI Securities predicts a positive outlook for Tata Motors in Calendar year 2025 (CY25), supported by new launches in the electric vehicle (EV) segment. The stock, which has corrected by over 30 per cent from its peak, is seen as a strong entry point for long-term investors. 

 

The optimism is underpinned by major progress at Jaguar Land Rover (JLR), a substantial reduction in automotive debt, a focus on profitability in domestic operations, and recent order wins in the domestic bus segment. These developments, analysts believe, are expected to stabilise commercial vehicle (CV) volumes in FY25.

 

According to an LKP Research report dated December 19, Jaguar Land Rover (JLR) recorded an earnings before interest, tax, depreciation and amortisation (Ebitda) margin of 11.7 per cent in the last quarter, a decline of 350 basis points due to negative operating leverage and higher marketing expenses. The India business, comprising CVs and passenger vehicles (PVs), posted an Ebitda margin of 9.5 per cent. While the US market remains robust, demand in Europe is subdued. Given this, the Management anticipates a major recovery in the second half of FY25, supported by eased supply constraints and strategic cost management, though marketing expenses will likely remain high to bolster JLR’s order book. Strong free cash flow generation is expected to fund JLR's electrification initiatives, with the company on track to achieve net cash status by FY25.

 

In the domestic PV segment, Tata Motors witnessed robust growth during the festive season, with recent and upcoming launches expected to sustain momentum. CV demand is projected to improve in the second half of FY25.

 

Analysts at LKP Research foresee consolidated Ebitda growth for FY25-27, driven by a combination of factors including lower gross margins at JLR due to weak luxury car demand in China and Europe, reduced volumes in PV and CV segments due to higher inventory levels and subdued retail sales, and improved profitability in the domestic segments. 

 

Recovery, they believe, is expected across all three business segments by FY26, boosted by government infrastructure spending, normalisation of supply chains at JLR, and market share gains in PV through new powertrain launches.

 

Given the stock’s correction of approximately 40 per cent from its 52-week high and a favourable valuation of 11.1x FY27 consolidated earnings estimates, analysts have revised the target price to Rs 970 and see the stock as ‘a value buy.’ However, potential slowdowns in key global markets remain a critical factor to monitor.

 

Emkay also maintains a positive outlook on Tata Motors. In a report dated December 18, the brokerage reaffirmed its ‘Add’ rating on the stock, with a target price of Rs 1,000.