1:2 Stock Split Ahead: Tata's Auto Company Makes Big Price Hike Announcement; BUY For Rs 1,235/TP By Sharekhan

Automobile giant, Tata Motors' share price witnessed selling pressure on June 19 after the company announced its plan to hike prices of commercial vehicles with effect from July 1, 2024. Tata Motors' stock price ended at Rs 977.40 apiece, down by 0.84% on BSE. Its market cap was at nearly Rs 3.25 lakh crore.

With PE ratio of 41.46% and ROE of 26.22%, Tata Motors share price gained 24% YTD on BSE. The stock's 52-week high and low is at Rs 1,065.60 apiece and Rs 557.45 apiece respectively.

Tata Motors Price Hike:

In its regulatory filing, on June 19, Tata Motors announced that the company will hike the price of its commercial vehicles effective 1st July 2024, up to 2%.

It added, "The price increase is to offset the impact of rising commodity prices. It will be applicable across the entire range of commercial vehicles, and will vary as per individual model and variant."

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.

Tata Motors Dividend:

Last week, Tata Motors turned ex-dividend on June 11. The auto company has announced a final dividend of ₹6.00 per Ordinary Share of the face value of ₹2 each (i.e.,@ 300%) (comprising of ₹3.00 normal dividend and ₹3.00 special dividend) and ₹6.20 per 'A' Ordinary Share of the face value ₹2 each (i.e.,@ 310%) (comprising of ₹3.10 normal dividend and ₹3.10 special dividend) for the financial year ended March 31, 2024. The payment of this will be done on or before June 28, 2024.

BUY Tata Motors Share Price:

In its latest report, Sharekhan highlighted that Tata Motors management indicated a (1) flat EBIT margin in FY25 (2) JLR to be net debt-zero by FY25 and (3) the Domestic PV industry to grow by under 5% rate in FY25 and (4) domestic CV industry to revive in H2FY25.

Accordingly, the brokerage believes that Tata Motors would continue to sustain its operating performance and sustain the cash generations. TML's operating performance in Q4FY24 was in line with estimates as all three divisions (JLR, CV and PVs) have reported EBITDA margins close to estimates.

Sharekhan has maintained its BUY rating on Tata Motors with a revised price target of Rs 1,235 owing to expectations of continued improvement in JLR, PV and CV businesses and reduced net automotive debt.

Also, recently, Prabhudas Lilladher in its note said, "We remain positive on Tata Motors based on the (1) healthy growth outlook across business verticals, (2) capex proposed for respective businesses to
deliver a sustainable product portfolio, (3) market share expansion in the SCVPU and CPV business, the (4) sustained growth rate in the downstream/spares business. Hence, we keep our estimates unchanged and maintain our 'ACCUMULATE' rating with a TP of Rs1,089 based on SoTP
valuation."

Part of the USD 150 billion Tata group, Tata Motors Limited, a USD 44 billion organization, is a leading global automobile manufacturer of cars, utility vehicles, pick-ups, trucks, and buses, offering an extensive range of integrated, smart, and e-mobility solutions. With 'Connecting Aspirations' at the core of its brand promise, Tata Motors is India's market leader in commercial vehicles and ranks among the top three in the passenger vehicles market.