1:2 Split Ahead: Tata's Auto Stock Less Than Rs 150 Away From 52-Week Low; Should You Buy? JM Sets Big Target

Tata Group-backed automobile giant, Tata Motors continues to be in deep red. The large-cap stock's weekly performance is down by 6%, while in a month, the decline escalated by 15.4%. This has turned Tata Motors in red for YTD performance in 2024. Despite the latest steep correction and subdued Q2 results for FY25. Brokerage JM Financial is still bullish on the stock with the target price fixed massively at Rs 1,100.

JM is optimistic about Tata Motors as it assumes the company's domestic passenger vehicle sales performance to be strong in the festive season. Also, new launches are expected to drive its growth.

Currently, Tata Motors' share price is less than Rs 150 away from hitting its 52-week low.

Tata Motors Share Price:

In the pre-market opening of November 13, Tata Motors stock touched Rs 813.45 high for the day on BSE. However, soon the stock corrected to Rs 783. In the previous session, Tata Motors stock ended at Rs 784.95 apiece on BSE, with the market of Rs 2,88,957.85 crore.

Tata stock has plunged by 33.4% compared to its 52-week high of Rs 1,179.05 apiece, while the stock is away by Rs 135.7 from its 52-week low of 52-week low of Rs 649.25 apiece. This is compared to the November 12th closing price.

YTD, the stock is down by 0.7%, while its half-yearly drop is about 18.11%

Should You Buy Tata Motors Share Price?

As per JM Financial's note, while the US market continues to be healthy, the demand environment in the EU remains muted. Management indicated of strong pick-up in 2H led by easing supply constraints and astute cost management. Marketing spends are expected to remain elevated (to drive JLR's order book). Healthy FCF generation is expected to support investments towards electrification at JLR and the company is on track to turn net cash by FY25 (guidance maintained).

Giving an outlook for JLR, JM highlighted that Despite this, the company has maintained its guidance for flattish EBIT margin in FY25 over FY24 (c.>8.5%). The company indicated that it will continue to focus on brand activation (through higher VME and FMI) to drive demand. FY25 investment guidance revised to ~£3.7bn from ~£3.5bn (£3.3bn in FY24). Current net debt stands at £1.2bn (vs. £1bn at 1QFY25 end) and the company expects to turn net cash positive during FY25.

Further, the brokerage believes Tata Motors CV segment EBITDA margin stood at 10.8% (+40bps YoY, -80bps QoQ). YoY improvement was led by lower RM cost. Retails during Jul'24 were impacted by a slowdown in infrastructure projects/a reduction in mining activities / heavy rains. However, fleet owners' sentiment index and freight index continue to remain healthy. The company expects CV demand to pick up during 2H. The continued focus of GOI on infrastructure spending remains an industry tailwind for the medium-to-long term.

In the domestic PV segment, TTMT witnessed strong growth during the festive season. Recent/new launches are expected to support growth. Domestic CV demand is also expected to pick up during 2H, the brokerage said.

On the valuation, JM's note sid, "Maintain BUY with Mar'26 SOTP of INR 1,100 (standalone / JLR valued at 12x / 2.5x EV/EBIDTA). The slowdown in key global markets remains monitorable."

Tata Motors Business Split of 1:2:

The auto player is set to split in the ratio of 1:2. The company is planning the demerger of Tata Motors into two separate listed companies housing A) the Commercial Vehicles business and its related investments in one entity and B) the Passenger Vehicles businesses including PV, EV, JLR, and its related investments in another entity.