1:2 Split Ratio Ahead: Tata's Auto Stock Dips 11% In 30 Days; BUY For Rs 1,175 Target; Makes Big Sales Update

Tata Group-backed automobile giant, Tata Motors share price has continued to consolidate significantly in the past few weeks, resulting in zero returns on monthly and six-monthly basis. Tata Motors' share price started October month on a bearish tone, trading below Rs 970 levels. There is a buy-on-dips opportunity in Tata Motors, with a target price of Rs 1,175 in the long term.

Tata Motors' share will be in focus ahead due to its monthly sales announcement, and upcoming split of business into two namely passenger cars and commercial vehicles. Also, upcoming Hyundai IPO which will be the biggest public offer in India, will keep auto giants like Tata Motors in focus due to the rival's entry.

On October 1, 2024, Tata Motors' share price ended at Rs 965.35 apiece, down by 0.96% on BSE with a market cap of Rs 3,55,334.15 crore. The stock is down by 11.07% in 1-month, and lower by 4.3% in six-month.

The auto stock's 52-week high and low are at Rs 1,179.05 apiece, and Rs 608.45 apiece respectively.

Tata Motors September Sales:

Tata Motors has announced that sales in the domestic & international market for Q2 FY 2024-25 stood at 2,15,034 vehicles, compared to 2,43,024 units during Q2 FY 2023-24. While in the month of September, sales declined by 15% to 69,694 units, compared to 82,023 units sold in September 2023.

Also, total commercial vehicles sales stood at 30,032 units in September 2024, down by 23% from 39,064 units in September 2023. Further, in Q2FY25, CV sales dipped by 19% to 84,281 units compared to 104,085 units in Q2FY24.

Tata Motors Split:

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.

Hyundai IPO:

Market watchdog Sebi nodded to Hyundai IPO. As per the draft prospectus, Hyundai is planning to launch its IPO through a pure offer for the sale of up to 142,194,700 equity shares. The IPO size is expected to be around Rs 25,000 crore.

Hyundai is the second largest carmaker in the country and will rival Tata Motors, and Maruti Suzuki.

BUY Tata Motors Share?

Brokerage Emkay Global upgraded its stance on Tata Motors to BUY from ADD in September month. However, it kept its target price unchanged at Rs 1,175 per share.

In its latest view, Emkay's note said, "TTMT stock price has corrected 16% from its peak, amid outlook downgrade at peer BMW (incl. due to muted China demand; and slowness in domestic CVs/PVs (incl. rising discounts/price cuts; link). We highlight that: i) for JLR, China is a relatively smaller market (~24% vs ~32% for BMW), while profitability and debt outlook are largely intact; ii) India CV outlook is improving, with margins likely to see strong increase led by healthy fleet operator profitability, sustained pricing discipline; iii) new launches, lower inventory would help outperformance vs a weak PV industry."

It added, "TTMT's B/S is healthier now, with valuations least demanding among OEMs. We trim FY26E/27E EPS by 2.5% (5%/11% revenue/PBT CAGR)."

For the PV segment, Emkay's note added, "Underlying metrics for the domestic PV industry continue to worsen amid slowing retails, rising inventory, and increasing discounts; our channel checks point to further weakness in outlook beyond the upcoming festive period. While TTMT would also be impacted by the overall sluggishness, we believe new launches incl. Curvv (forms ~10% of dealer volumes in some markets, as per checks) and relatively lower inventories would help it post better-than-industry performance (we build in 6% volume CAGR over FY24-27E)."

In the case of the CV segment, Emkay's note said, "We believe the MHCV industry would enter an upcycle FY26E onwards after 2 flattish years (FY23-25E), aided by delayed implementation of Rail DFC. Moreover, continued healthy fleet operator profitability and sustained pricing discipline would drive strong margin expansion (we build ~280bps increase over FY24-27E)."

Part of the USD 165 billion Tata Group, Tata Motors, a USD 44 billion organisation, is a leading global automobile manufacturer of cars, utility vehicles, pick-ups, trucks and buses.