Tata Motors jumps to all-time high after Nomura upgrade and highest-ever price target of Rs 1,294

admin August 30, 2024 • comments off

Tata Motors’ share price surged by 5.65% to record highs of Rs 1,084.90 per share on the NSE during Thursday’s trading session. This increase followed the Japanese brokerage firm Nomura upgrading Tata Motors Ltd. from a ‘Neutral’ to a ‘Buy’ rating.

Nomura Upgrades Tata Motors To Buy

Nomura has upgraded Tata Motors Ltd. to a ‘Buy’ rating from the previous ‘Neutral’ and increased its price target to Rs 1,294 per share, up from Rs 1,141. This revised target implies a potential upside of 26% from the stock’s closing levels on Wednesday and is the highest target on the street.

What Are The Reasons for Upgrade?

The upgrade is primarily due to expectations of significant upsides from Jaguar Land Rover’s (JLR) improved execution. Nomura also believes Tata Motors’ proposed demerger plan to separate its passenger vehicle (PV) and commercial vehicle (CV) businesses could unlock value for the CV segment.

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What’s the View on JLR Business?

Nomura has raised the target multiple for JLR to 3.5 times its Enterprise Value-to-EBITDA, up from 2.75 times, reflecting potential upsides. The brokerage projects EBIT margins to increase from 7.8% in FY25 to 10.1% by FY27, with further potential to rise to 11-12% by FY30.

This growth is expected to be supported by the reduction of Jaguar ICE models, the success of new Jaguar EVs (JEA platform), and more premium Range Rover variants.

What’s The Current Valuation and Financial Outlook?

Currently, Tata Motors is trading at 5.4 times FY26 Enterprise Value-to-EBITDA. The company, which had a net debt of Rs 16,000 crore (s 44 per share) in FY24, is anticipated to transition to a net cash position of Rs 57 per share by FY26 and Rs 140 per share by FY27.

What Is The Down Side Risk?

However, Nomura also highlighted key downside risks, including a potential sharp drop in demand in China and the EU, and rising incentives.

Stock Performance In Last On Year

In terms of stock performance, Tata Motor shares have demonstrated positive returns across multiple time frames. Over the past month, the stock has given a commendable 13.09% return, showcasing its stability and growth potential. The last six months have seen even more impressive results, with a substantial increase of 33%, indicating a strong upward trend.

Year-to-date, Tata Motor shares have surged by 36.59%, reinforcing the stock’s positive momentum in the current fiscal year. Looking at the broader picture, the stock has delivered an impressive return of over 68.84% in the last twelve months, emphasizing its sustained growth and attractiveness to investors.

(Disclaimer: Views, recommendations, and opinions expressed are personal and do not reflect the official position or policy of Financial Express.com. Readers are advised to consult qualified financial advisors before making any investment decisions. Reproducing this content without permission is prohibited.)

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