Synopsis: Tata Motors' stock has declined approximately 38% from its July peak of ₹1,179.05, trading at ₹742.25 as of December 20, 2024. LKP Securities identifies this correction as a 'value buy,' setting a target price of ₹970, indicating a potential upside of nearly 31%.
Tata Motors, a prominent entity in the automotive sector, has experienced a significant stock price correction, declining about 38% from its July high of ₹1,179.05 to ₹742.25.
This downturn has prompted investors to reassess the stock's valuation and future prospects.
LKP Securities, a domestic brokerage firm, views this correction as an opportunity for value investment.
They have issued a 'buy' recommendation with a target price of ₹970, suggesting a potential upside of nearly 31% from the current trading price.
The stock is presently trading at 11.1 times its FY27E consolidated earnings estimates, which LKP considers attractive.
The brokerage anticipates a rebound in domestic commercial vehicle (CV) demand in the second half of the fiscal year, bolstered by recent product launches.
They also note that Tata Motors' British subsidiary, Jaguar Land Rover (JLR), reported an EBITDA margin of 11.7% in the recent quarter, a decline of 350 basis points attributed to negative operating leverage and increased marketing expenditures.
The India business, encompassing both CV and passenger vehicle (PV) segments, recorded an EBITDA margin of 9.5%.
LKP Securities acknowledges potential challenges, including a slowdown in key global markets, particularly in China and Europe, which could impact luxury car demand and lead to higher discounts.
Despite these concerns, they maintain an optimistic outlook, expecting the domestic CV business to recover from FY26E, driven by increased government spending on infrastructure and construction projects.
They also foresee improvements in the JLR business in the second half of FY25, as supply chain issues normalize, and anticipate market share recovery in the PV segment during FY26-27E, supported by new launches across multiple powertrains.
Conclusion:
While Tata Motors faces near-term challenges, LKP Securities' analysis suggests that the current stock price presents a compelling entry point for investors seeking value.
The anticipated recovery in domestic CV demand, strategic new product launches, and expected improvements in JLR's performance underpin this positive outlook.
However, investors should remain cognizant of potential risks in global markets and monitor developments closely.
Disclaimer:
This article is for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
