1:2 Split: Tata's Auto Stock Target Rs 1,330; BUY For Of 25% Gains Ahead; New SUV Curvv To Drive Growth

Tata Group-backed automobile giant, Tata Motors' share price recovered previous losses in the trading week from August 5-9, gaining broadly by over 2% on BSE. This comes after brokerage BofA Securities reiterated a BUY rating on Tata Motors stock, hinting at nearly 22% potential upside ahead. Other brokerages are also bullish on the stock with target prices ranging from Rs 1,175 to over Rs 1,250. A key growth-driving factor

Tata Motors' share price ended at Rs 1067.45 apiece on August 9, up by 2.51% with a market cap of Rs 3,54,890.67 crore. The stock's 52-week high and low are at Rs 1,179.05 apiece and Rs 593.50 apiece respectively.

However, Tata Motors started this week's trading session on a bearish note, tracking the selling pressure of the broader market. However, the auto stock recovered sharply with gains for three consecutive days from August 7-8. This led to a weekly performance in green in Tata Motors share as it rose by over 2% on BSE.

Tata Motors' share price was down by nearly 13% from July 31 to August 6th.

The upside in Tata Motors is after BofA highlighted that the company's newly launched SUV coupe is a significant move that fills a large growing whitespace in the market. Accordingly, the company's new electric vehicle model 'Curvv' is seen as a game-changer in India's EV segment.

Not just BofA Securities, but Nomura has also set a target of Rs 1,303 on Tata Motors while seeing Tata Curvv potentially breaking all key barriers of EV adoption.

Also, brokerage Jefferies has maintained BUY on this auto player as it believes the Curvv fills all key gaps in its portfolio. According to Jefferies, Tata Motors' mid-sized SUV Curvv leads to a big comeback by the company in the passenger vehicles segment and is likely to strengthen its market share ahead.

Going ahead, 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.

As per the latest update on August 1, the Board of Directors of Tata Motors Ltd has approved a Composite Scheme of Arrangement involving the demerger of its CV business undertaking and the merger of Tata Motors Passenger Vehicles (TMPV) with the existing listed company thereby resulting in two separate listed companies for the CV and PV businesses.

The scheme includes a share entitlement ratio will be 1:1, i.e., the shareholders of Tata Motors Ltd will have an identical shareholding in both the listed entities. Pursuant to the Scheme, shareholders of TML will receive ONE share of TMLCV of face value Rs 2/- fully paid up for every ONE fully paid-up share of Rs 2/- held in TML of the same class ("Entitlement Ratio").

The scheme will further empower the respective businesses to pursue their differentiated strategies with greater agility and will enhance value for the shareholders.

Post Q1 results, JM Financial's note said, "Management indicated of higher marketing spends going forward to drive JLR's order book. FY25 EBIT margin is expected to be flat. Strong FCF generation is expected to support investments towards electrification at JLR and the company is on track to turn net cash by FY25 (net debt £1.0bn currently). In the domestic PV segment, while the demand environment remains muted, new launches (incl. Curvv) are expected to support growth. Domestic CV demand is also expected to pick up going ahead. Healthy margin performance augurs well and the near net cash position in the Indian auto business provides comfort. Maintain BUY with Jun'25 SOTP of INR 1,200 (standalone / JLR valued at 12x / 3.0x EV/EBIDTA). The slowdown in key global markets remains monitorable."

Further, Prabhudas Lilladher said, "We maintain our positive view on TTMT as 1) JLR business is likely to deliver sustainable growth, 2) CV business is likely to report healthy performance due to replacement and demand in higher tonnage vehicles, 3) cost reduction and mix improvement are expected to expand profitability, and 4) demerger and listing could lead to sustained growth for respective businesses and benefit shareholders. Factoring this, we estimate its revenue/EBITDA to grow at a CAGR of 11.6/20% over FY24-26E. We retain "Accumulate" with SoTP-based target price of Rs1,254 (previous Rs1,089)."

Moreover, Emkay Global believes India's CVs are a relatively bright spot (the industry entering an upcycle from FY26E), while the global outlook is muted and India PVs are slated to outperform led by the new mid-size SUV launch.

Emkay's FY25/26 estimates are broadly unchanged; we introduce FY27 estimates (build-in 8% EBITDA CAGR in FY24-27E). It added, "We retain ADD with revised up SoTP-based TP of Rs1,175/sh (earlier Rs1,050; upward revision on increase in India CV business multiple to 13x, in line with AL's, and roll over to Jun-26E).

Tata Motors is a USD 44 billion organization, and is a leading global automobile manufacturer of cars, utility vehicles, pickups, trucks, and buses, offering an extensive range of integrated, smart, and e-mobility solutions. With 'Connecting Aspirations' at the core of its brand promise, Tata Motors is India's market leader in commercial vehicles and ranks among the top three in the passenger vehicles market.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.