1:2 Split, 300-310% Dividend Soon: Tata's Auto Stock May Rise 13%; Rs 1,089 TP/Accumulate By Prabhudas

Tata Group-backed automobile giant, Tata Motors has been trading volatile since its Q4FY24 earnings report. In five trading sessions, the stock is broadly down by 2.3%, while its monthly performance is a downside of 3.40%. Nonetheless, YTD, the stock is still up by 22%. Tata Motors' share price is suggested to accumulate by Prabhudas Lilladher for a target price of Rs 1,089, which signals a nearly 13% potential upside ahead.

Tata Motors Share Price:

On BSE, Tata Motors share price stood at Rs 964.70 apiece, up by 0.54% with a market cap of Rs 3,20,641.10 crore. The stock has broadly been floating around the Rs 1,000 mark.

The stock's 52-week high and low are at Rs 1,065.60 and Rs 504.75 apiece respectively.

Tata Motors' key triggers ahead are its dividend payout on ordinary shares and DVR shares.

This auto giant announced a final dividend of 300% amounting to Rs 6 per share to investors holding its ordinary shares. The face value is Rs 2 each. The final dividend includes a Rs 3 per share normal dividend and a special dividend of Rs 3 each.

For DVR shareholders, the company announced a normal dividend of Rs 3.10 per share and a special dividend of Rs 3 per share for DVR investors. In total, the final dividend payout is 310% worth Rs 6.10 per share having a face value of Rs 2 each, higher than the dividend that ordinary shareholders will get.

Also, Tata Motors' share is set to split into two. 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.

Prabhudas Lilladher On Tata Motors:

Swarnendu Bhushan Co. Head of Research - Institutional Equities Prabhudas Lilladher said," TTMT consolidated revenue for Q4FY24 grew by 13.3% YoY led by strong growth in its JLR & PV business while CV business revenue grew by 1.6% YoY despite a 5.8% YoY decline in its volume. The revenue growth was 3.4% lower than Ple while it was in line with consensus estimates. EBITDA margin came in at 14.2% (14.6% excl. product development expenses) against PLe/BBGe of 13.9%/10.5% respectively."

Further, Bhushan added, "JLR EBIT margin grew by 270bps YoY and the management has guided for it to remain at 8.5% in FY25. TTMT noted that it aims to launch a new model in the UV category which shall aid in volume expansion, however; at a moderate pace. It expects CV volume to remain flat due to the general election in H1FY25 and high base, however; anticipates good demand for higher tonnage (48Ton+) models."

Accordingly, Bhushan added, "We maintain our positive stance on TTMT given (1) Improvement in JLR profitability, (2) CV business to perform well due to anticipated demand in higher tonnage models, (3) New launches to in ICE & EV category (4) Increase in PV penetration and its stable improve in its EBITDA margin (before R&D expenses)."

Factoring this, the analyst said, "We estimate its revenue/EBITDA to grow at a CAGR of 8%/16% over FY24-FY26E. We retain "ACCUMULATE" with SoTP based target price of Rs 1,089 (earlier Rs 1,080)."

During the last quarter of FY24, 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.

While 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.

For the entire fiscal, Tata Motors reported record revenues of Rs 437.9K Cr, an all-time high EBITDA at Rs 62.8K Cr, the highest ever PBT (bei) of Rs 28.9K Cr (+Rs 27.1K Cr over the previous year) and net profit of Rs 31.8K Cr (+Rs 29.1K Cr over the previous year). The strong performance has also helped to recognize a Deferred Tax Asset of Rs 8.3K Cr at JLR and TML.

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