Tata Group's auto giant, Tata Motors is planning a massive investment in FY25 to tap growth. To be precise, the funding will be a behemoth Rs 43,000 crore in FY25 in products and technologies. After Q4 results, brokerages have broadly maintained BUY on Tata Motors. The highest target price is set between Rs 1,120 to Rs 1,240 on Tata Motors stock ahead of its 300-310% dividend payout and 1:2 demerger.
Tata Motors Big Announcement:
This auto player is set to invest a whopping Rs 43,000 crore for products and technologies in the financial year 2024-25, higher than the investment of Rs 41,200 crore in FY24. Of the total, its luxury car brand, Jaguar Land Rover will garner a behemoth share of approximately Rs 35,000 crore, while Rs 8,000 crore will be infused for Tata Motors.
In its financial results for Q4FY24, Adrian Mardell, JLR Chief Executive Officer, said, "We are entering the next exciting phase of our Reimagine strategy which will see us bring to life our modern luxury electric vehicles and deliver an accompanying modern luxury experience for our clients, ensuring we continue to vigorously address the challenges we have encountered in 2024."
PB Balaji, Group Chief Financial Officer, Tata Motors had announced that the India business is now debt free, and "we are on track to become net automotive debt free on a consolidated basis in FY25." He further said, "The businesses are executing well on their distinct strategies and therefore, we are confident of sustaining this strong performance in the coming years."
Tata Motors Earnings:
In Q4FY24, the Tata Group-backed top auto player bagged a consolidated net profit of Rs 17,407.18 crore, rising by 107.4% YoY. Also, Tata Motors' consolidated revenue jumped by 13.51% YoY to Rs 119,213.35 crore.
Also, JLR continued its strong financial performance trend in the financial year, with another record-breaking quarter in Q4 FY24. Revenue for the quarter was £7.9 billion, up 11% versus Q4 FY23 and up 6% versus Q3 FY24. Revenues for FY24 were £29.0 billion - JLR's highest-ever full-year revenue and up 27% compared to the prior year.
Tata Motors Demerger of 1:2:
Apart from robust investment in FY25, Tata Motors is also in focus for its demerger into two businesses. Simply put, Tata Motors will be split and listed into two separate entities. Tata Motors board has approved the demerger of the company 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:
Also, the auto giant has declared hefty rewards for its investors. The company will pay final dividend of Rs 6.00 per Ordinary Share of Rs 2 each (@ 300%) (Rs 3.00 normal dividend and Rs 3.00 special dividend) and Rs 6.20 per 'A' Ordinary Share of Rs 2 each (@ 310%) (Rs 3.10 normal dividend and Rs 3.10 special dividend) for the financial year ended March 31, 2024.
The dividend, if declared at the AGM, shall be paid to the eligible shareholders on or before June 28, 2024.
Buy Tata Motors Share Price:
In its latest note, ICICI Direct said, "Amidst a healthy order book of 1.33 lakh units and a slew of exciting product launches in the pipeline, we expect JLR to continue reporting healthy profitability going forward. We have baked in 16%/8.5% as EBITDA/EBIT margins for FY25E with similar readings pegged at 17%/9.7% respectively for FY26E."
Further, the brokerage added, "TML focus in the interim is to further improve upon the profitability in this space amidst its proven capabilities across powertrains (ICE, CNG, Electric, Hydrogen, etc.) and guidance for double-digit EBITDA margins. On the EV side, it plans to build upon its leadership position in E-PV space with target to sell ~1 lakh E-PVs in FY25E and is also a prominent player winning orders in CESL E-bus tenders."
Accordingly, ICICI Direct's note said, "Tata Motors is reporting record performance across all its segments, however due to lack of near-term triggers we retain our HOLD rating on the stock. We value Tata Motors at ₹ 1,120 on SOTP basis (12x, 2.2x FY26E EV/EBITDA to India, JLR; ₹225 value to Indian E-PV & stake in Tata Tech.)."
Post incorporating Q4FY24 performance in our estimate, brokerage Sharekhan maintained its Buy on Tata Motors Ltd (TML) with a revised PT of Rs 1235 on expecting continued improvement in JLR, PV and CV businesses and reduced net automotive debt.
From the two target prices of the brokerages, Tata Motors share price has the potential to gain between 17% to nearly 30% in the near term. In the special live trading session on Saturday, Tata Motors stock emerged among top gainers on BSE and NSE. The stock ended at Rs 952.95 apiece, up by nearly a per cent with market cap of Rs 3,16,735.71 crore. The stock's 52-week high and low is at Rs 1,065.60 and Rs 504.75 apiece respectively.
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor 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.
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