Tata's Megahit Stock: After Doubling On Nifty In 2023, Tata Motors Upgraded By JP Morgan, TP Set At Rs 925

After a star-like performance in 2023, Tata Motors welcomed the year 2024 with a bang and has seen a significant jump in share price. This multi-bagger of Tata Group further saw an upside after global brokerage JP Morgan upgraded its rating on the stock to 'overweight' from 'neutral'. Morgan has also increased its target price highest to Rs 925 per share. This will imply over 16% potential upside in Tata Motors ahead.

In its research note, JP Morgan highlighted the reason behind its upgrade to Tata Motors. One of the key factors will be better-than-expected margin and free-cash-flow (FCF) delivery at Jaguar Land Rover (JLR). Also, JLR's strengthening margins and its priority for profitability over volumes are seen to be another key positive element for the stock price.

Not only that Tata Motors has also continued to hold its resilient market share in the passenger car segment despite new launches from its rivals. Accordingly, Morgan raised its target price to the highest at Rs 925 from earlier Rs 680 apiece.

Tata Motors has surpassed many brokerages' target prices in recent times. Many brokerages like CLSA, Nuvama, Jefferies, Normura, Antique Stock Broking and Sharekhan have recommended buying the stock further.

This auto giant was the most bought stock in the large-cap basket on these exchanges in 2023. It not only climbed the ladder to become part of Nifty 50 stocks, but it also became the only Nifty stock to double and gave multi-bagging returns last year.

In a year, Tata Motors' share price has zoomed by nearly 106%. On New Year's Day (January 1), the auto player touched a new 52-week high of Rs 804 apiece. The stock ended the year 2023 at Rs 779.95 apiece.

Tata Motors sales in the domestic & international market for Q3 FY 2023-24 stood at 234,981 vehicles, compared to 228,169 units during Q3 FY 2022-23. Of the total, domestic sales were at 229,610 units, up by 3% YoY. In December alone, domestic sales jumped by 4% YoY to 76,138 units. Broadly, the sales were healthy in segments like CVs, and PVs, however, sales of EVs outperformed.

On January 1st, Girish Wagh, Executive Director, Tata Motors said that going ahead the company expects demand to improve in Q4FY24 across most segments of the CV industry due to the Government's continuing thrust on infrastructure development, the promising growth outlook of the economy and our demand-pull initiatives.

Also, Shailesh Chandra, Managing Director, of Tata Motors Passenger Vehicles Ltd. and Tata Passenger Electric Mobility said that with multiple new products, including a new nameplate scheduled for launch in CY2024, they remain optimistic about continuing the growth trend in the quarters ahead.

In its Q2FY24 financial results report, Tata Motors stated that they aim to deliver a stronger performance in H2, due to a healthy order book at JLR, strong demand for heavy trucks in CV and exciting new generation products in PV. The auto giant also expects its financial performance to improve further owing to a richer mix, continued low-break-even in JLR, execution of demand-pull strategy in CV and improving profitability in PV/EV.

In Q2FY24, JLR revenues improved 30.4% to £6.9b. Strong wholesales and improved mix resulted in EBIT margins of 7.3% (+630bps). CV revenues improved by 22.3% and EBIT improved to 7.9% (+560bps) benefiting from higher realisations, richer mix and favourable commodity prices. PV revenues were marginally down 3.0% impacted by the transition to the new launches while EBIT margins improved by 140 bps to 1.8% due to savings in commodity costs.

While Tata Motors continued its strong performance in Q2 FY24 with revenues at ₹105.1K Cr (up 32.1%), EBITDA at ₹14.4K Cr (up 86.4%) and EBIT of ₹7.8KCr (+₹5.9KCr), as all auto verticals continued their profitable growth trajectory. PBT (bei) improved by ₹7.9KCr to ₹6.1KCr and Net Profit was ₹3.8KCr. In H1 FY24, the business reported a strong PBT (bei) of ₹11.4KCr, an improvement of ₹18.2KCr over the previous year. Net Automotive debt reduced to ₹38.7KCr.

Furthermore, JLR had revealed that the EBIT margin for FY24 is now expected to improve to around 8% compared to the 6% plus previously indicated. While they continue to expect Free Cash Flow of over £2bn in FY24 with net debt reducing to less than c. £1bn by the end of FY24.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, 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.