Tata Motors, the Tata Group-backed automobile giant, has continued to hold above Rs 700 mark for four consecutive trading session despite the volatility. On Friday, February 7, after opening in green, Tata Motors stock touched an intraday low of Rs 703.65 apiece, which makes it just Rs 19 away from hitting the 52-week low. YTD downside is over 5% as of now in Tata Motors. Does this bring buy-on-dips opportunity?
Tata Motors Share Price:
At the time of writing, Tata Motors share price traded flat to Rs 710.40 apiece on BSE with market cap of Rs 2,61,511.68 crore. The stock extended its losses when market crashed with Sensex erasing its 78,000 mark. The heavyweight auto stock touched an intraday low of Rs 703.65 apiece, which is just Rs 19.4 away from hitting an intraday low of Rs 684.25 apiece on BSE.
The stock has significantly dipped from its 52-week high of Rs 1,179.05 apiece. Nonetheless, the stock has continued to hold above Rs 700 mark for four sessions straight, and has surged by 2.4% in past five sessions. But its year-to-date performance is down by 5.2% as of now.
In the latest development, the record date for Tata Motors demerger into 1:1 ratio is expected to be in October this year.
Group CFO PB Balaji in a media report said that the demerger of Tata Motors into two separate listed companies is progressing well. He revealed that the company is expecting NOC from the Stock Exchange and SEBI anytime soon. Also, he added that the operational activities are in an advanced stage and progressing as per plan, as per the ET Now report.
Further, the report highlighted that Balaji said, if all goes well in the case of dates from the honourable NCLT, then the demerger's effective date could likely be in October this year.
The company's demerger will be of 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. As part of the demerger plan, Tata Motors shareholders will get 1 share of TMLCV with a face value of Rs 2 each for every 1 share held in the company. This makes the business split ratio to 1:1.
Also, Shantanu Naidu, who was the youngest manager to late philanthropist Ratan Tata, has announced through his LinkedIn profile about his new role as General Manager, Head - Strategic Initiatives at Tata Motors.
Tata Motors Share Recommendation:
Brokerage KR Choksey said, Tata Motors underperformed our estimates due to higher-than-expected operating expenses, however company reported steady growth, driven by strategic cost control, but faces ongoing challenges. The PV business struggled with declining volumes and adverse mix, while CV segment showed a marginal recovery, JLR's performance remains strong but is tempered by weak demand in China and increased marketing expenses. Rising emission costs and warranty provisions could further impact profitability. Despite efforts to maintain margins, the uncertain macroeconomic environment, especially in key markets, is a concern.
KR's note added, "We lower our EPS estimates by 11.7%/ 8.2% for FY26E/27E respectively, primarily due to weaker-than-expected earnings in Q3FY25, demand moderation in PV and CV segments. The ongoing weakness in the Chinese market, along with potential long-term margin pressures and rising emission and warranty costs, pose further risks to profitability."
On the valuation, KR Choksey's note said, "We have rolled over our valuation to FY27E estimates, applying EV/EBITDA multiple of 3.0x for JLR, 2.0x for the Chery-JLR JV, 12.0x for TML-PV, and 10.0x for TML-CV on FY27E EBITDA. Based on this, we revise our target price to INR 757 per share (previously INR 989), incorporating INR 36.0 for Tata Technologies (20.0% discount on holding). Subsequently, we maintain our ACCUMULATE rating on Tata Motors Ltd."
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