Buy This Tata Stock With Strong Orderbook, Share Likely To Give 27% Return, Say Motilal Oswal

Motilal Oswal in its recent report on Tata Motors Limited (TTMT) recommends "Buy" the stock for a target price of Rs 520 apiece. Purchase of the stock at the current market price would yield 27% positive returns over the course of a year, according to the brokerage's provided target price. Tata Motors is a Large Cap Tata Group company that operates in Auto Sector. It has a market capitalisation of Rs 1,37,131 crore.

Stock Outlook & Returns

The stock last traded at Rs 412.90/share on NSE, jumped 6.02% as compared to its previous close of Rs 389.45/share. It's 52-week high as on 18 January 2022 is Rs 528.50/share and its 52-week low as on 12 May 2022 is Rs 366.20/share, respectively. 

The stock has fallen 7.06% in a week, 10.32% in 1 month and 2.26% in 3 months, respectively. In 6 months, it has fallen 6,49%, whereas, in the past 1 year, the stock has fallen 16.92%. However, the stock zoomed 122.51% in the last 3 years. In the last 5 years, the stock has fallen 8.42%.

Wholesale volumes rise 15% YoY and 6% QoQ

Wholesale volumes (ex-China JV) grew 15% YoY/6% QoQ to 79.6k units, in line with our expectations. The improvement in chip supplies led to growth in wholesales. LR volumes improved 9% YoY/4% QoQ to 76.1k units, while Jaguar volumes were up 20% YoY/down 2% QoQ at 16.3k units, including the China JV. Wholesales were higher QoQ in North America (+17%), UK (+13%) and overseas (+10%) but were lower in China (-13%) and Europe (-3%). China volumes remained affected by Covid. Production of the new Range Rover and new Range Rover Sport has doubled on the QoQ basis to 27.5k units in 3QFY23. This mix is better than expected and would materially influence operating performance in 3Q. FCF is expected to be positive at GBP400m for Q3FY23.

Retail volumes up 6% YoY but down 4% QoQ

Retail sales grew 6% YoY (-4% QoQ) to 84.8k units. Historically 3Q retails have been stronger than 2Q. Retails were higher YoY in North America/UK/Overseas by 26%/14%/12% but declined 6%/8.5% in Europe/China.  Order book as on 31th Dec'22 has grown to almost 215k units, up around 10k orders from 30th Sep'22, reflecting strong demand.

Valuation and view

All three businesses of TTMT are in the recovery mode. While the India CV business will see a cyclical recovery, the India PV business is in a structural recovery mode. JLR is also witnessing a cyclical recovery, supported by a favorable product mix. However, supply-side issues will defer the recovery process. While there will be no near-term catalysts from the JLR business, the India business (~50% of SoTP) will see a continued recovery. "The stock trades at 17.1x FY24E consolidated EPS and 3x P/B. We maintain our Buy rating with a TP of INR520 (Dec'24 SoTP-based)," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.