Brokerages see upside of over 15% upside Tata Motors stock price, should you buy
Brokerages remain upbeat about automobile major Tata Motors and they have given an upside of more than 15 per cent in .
For the CV business, Tata Motors targets strong double-digit EBITDA margin, annual capex of ₹25 billion, and strong FCF generation. While for PV business, it expects double-digit EBITDA margin, annual capex of Rs30 billion, and positive FCF generation.
For EVs, it aims to achieve positive EBITDA margin, cumulative capex of $2 billion until FY27 for product development and architectures, and breakeven FCF.
What should investors do?
Motilal Oswal Securities said Tata Motors should witness a healthy recovery as supply-side issues ease for JLR and commodity headwinds stabilise for the India business.
Tata Motors, it said, will benefit from the CV upcycle and stable growth in PVs, b) company-specific volume/margin drivers, and a sharp improvement in FCF, as well as a reduction in net debt in both JLR and the India business.
The stock trades at 19.2 times FY24 and 16.7 times FY25 consolidate PE and 4.9 times FY24 EV/Ebitda and 4.2 times FY25 EV/Ebitda. Motilal Oswal has a target of ₹650 on the stock.
Tata Motor’s stock price has grown 12.7% over the past five years ( ₹310 levels in June 2018), outperforming the broader Nifty Auto index, said ICICI Securities
“We maintain BUY on the stock tracking profitability at the helm in domestic CV & PV business (including EVs), JLR’s progressive volume recovery on the anvil, reiterated commitment towards EVs & healthy FCF generation,” it said in its report. Retaining our financial estimates & marginally tweaking our valuations, we now value TML at ₹725 on SOTP basis (10x, 2x FY25E EV/EBITDA on India, JLR; ₹126 value to Indian EV business; earlier TP ₹650),” it said.
ICICI Securities said that Tata Motor’s intent to go auto net debt free by FY25 though healthy CFO generation and sale of non-core assets (including stake sale in Tata Tech), while JLR guiding for FCF generation of £2 billion & net debt reduction to <£1 billion by FY24E, would be major triggers for stock movement.
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Updated: 08 Jun 2023, 10:55 PM IST
