Tata Motors Share Price: Prabhudas Lilladher, Motilal Oswal Recommend To Buy For Rs 1,000-1,010 Target Prices

Tata Group-backed automobile flagship company, Tata Motors was the only Nifty 50 stock that gained massively in 2023, and the stock continued to rise even after its Q3 results to hit a new 52-week high of Rs 949.60 apiece. Since then, the stock has corrected, ending the trading week from February 5th to 9th on a bearish note with a downfall of 3%.

However, the latest hiccups in Tata Motors only bring a buying-on-dips opportunity for target prices ranging from Rs 1,000 to Rs 1,010. Brokerages like Prabhudas Lilladher and Motilal Oswal have upgraded their recommendations on Tata Motors.

Tata Motors Share Price:

After hitting a new record high or 52-week high of Rs 949.60 apiece on February 5, Tata Motors shares which have witnessed significant upside since January month, saw profit booking. On February 9th, the stock ended with a drop of 1.03% to Rs 914.95 apiece on BSE with a market cap of Rs 3,04,023.90 crore. Last trading week, Tata Motors share were down by 2.7%.

But Tata Motors are multi-baggers and have continued to like a star. The stock's monthly upside is over 12%, while six-monthly gains are nearly 51%. Year-to-date, the stock zoomed by 16%. In a year, the stock gives triple-digit returns of 107% on BSE. There is more upside ahead!

Tata Motors has a potential for over 10% more upside in the near term.

Tata Motors Earnings:

TML delivered a strong performance in Q3 FY24 with Revenue of ₹110.6K Cr (up 25.0%), EBITDA at ₹15.8K Cr (up 60.6%) and EBIT of ₹9.2K Cr (+₹5.3K Cr) with all automotive verticals continuing their profitable growth trajectory. PBT (bei) improved by ₹4.4K Cr to ₹7.6K Cr and Net Profit was ₹7.1K Cr. For YTD FY24, the business reported strong PBT (bei) of ₹19.0K Cr, an improvement of ₹22.6K Cr over the previous year. Net Automotive debt reduced further to ₹29.2K Cr.

Meanwhile, JLR revenue improved 22% to £7.4b. Improved wholesales and reduced material costs resulted in EBIT margins of 8.8% (+510bps). CV revenue improved by 19.2% and EBIT improved to 8.6% (+270bps) benefiting from higher realisations and richer mix. PV revenues were up by 10.6% and EBIT margins improved by 60 bps to 2.1% led by savings in commodity costs.

Looking ahead, Tata Motors said, "We remain positive on all three auto businesses. We expect the performance to further improve in Q4 on account of seasonality, new launches and improving supplies at JLR. We achieved net debt reduction of ₹9.5K Cr in Q3 and we are confident of achieving our deleveraging plans."

Tata Motors Share Target Prices:

Prabhudas Lilladher Target Price Of Rs 1,010 On Tata Motors:

Tata Motors' (TTMT) console. revenue was largely in line with our and consensus estimates, however, EBITDA margin at 13.9% beat PLe and BBGe easily. JLR sees 4Q performance to be strong on a seasonality basis and has guided for EBIT of >8% in FY24. Its ASP decline paused in 3Q, after falling for 3 successive quarters, due to a better mix. Conversely, benefits from volume ramp-up aided by a good order book and a rich mix of higher ASP models within that should support ASP and margins at higher levels. Lower CV discounts helped margins in 3Q; we see CV margins continuing to expand in 4Q. TTMT noted slowed demand for PV and CV in FY25 on a high base and general election period among other factors.

We maintain our positive stance on TTMT given (1) JLR's volume ramp-up resulting in strong revenue, profitability and FCF, 2) India CV benefitting from underlying economic strength, benign input costs and lower discounts and (3) focus on market share in PV segment (14.6% in Q3FY24 vs 8% in FY21) led by model launches and rising EV penetration. We increase our FY24/25/26E EBITDA estimates by 2%-6%, to factor in TTMT's 3QFY24 margin and PAT performance. Retain 'BUY' with SoTP-based TP of Rs 1,010 (earlier Rs 900).

Motilal Oswal Target Price Of Rs 1,000 On Tata Motors:

TTMT should witness a healthy recovery as supply-side issues ebb (for JLR) and commodity headwinds stabilize (for the India business). The next leg of growth will be driven by JLR, as we expect EBIT margin to reach ~9.9% by FY26, in line with the management's guidance. While the India CV and PV businesses would see some moderation in growth in FY25E, the focus shifts to margin expansionled earnings growth, which is likely to sustain.

We upgrade our consolidated EPS by 23%/26% for FY24E/25E to factor in: better-than-expected gross margin in JLR, higher other income, and lower tax.

The stock trades at 16.6x/14.1x FY24E/FY25E consolidate P/E and 6.1x/4.8x EV/EBITDA. Reiterate BUY with an FY26 SOTP-based TP of INR1,000

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.