1:2 Split Soon: Tata Group's Mega Auto Stock Recommended To Buy For Rs 1,133 TP Ahead Of Splitting

Tata Group-backed 79-year-old auto giant, Tata Motors' share price almost neared the Rs 1,000 mark on stock exchanges despite market trends being volatile on Monday. This is because investors cheered global leading brokerage CLSA continued to 'outperform' Tata Motors and recommended a target price of Rs 1,133.

There is a potential upside of 15% in Tata Motors on BSE and NSE, which is planning to split its business into two listed entities.

On BSE, Tata Motors' share price ended at Rs 986.05 apiece, up by nearly a per cent with a market cap of Rs 3,27,689.23 crore on March 26th. Tata Motors' shares touched an intraday high of Rs 994.95 apiece during trading hours.

The stock is currently nearing towards its all-time high of Rs 1,065.60 apiece, while it is up by 146.26% from its 52-week low of Rs 400.40 apiece.

CLSA is expecting Tata Motors' profitability to be robust, especially after its luxury-car brand Jaguar Land Rover reported an increase of 10% in volumes between January to February 2024 compared to the same period a year ago.

The brokerage is expecting JLR to gain market share in the domestic passenger vehicle segment. Accordingly, CLSA has recommended BUY for Rs 1,133 on Tata Motors while maintaining its 'Outperform' rating.

As per the latest data by the UK-based Society of Motor Manufacturers and Traders (SMMT), overall new car registration in the UK rose by 14% to 84,886 units in February on a year-on-year basis. In the first two months of 2024, the new car registration jumped 10.3% YoY to 227,762 units.

Of the total, Tata Motors luxury brand Jaguar recorded a whopping 136.54% surge in new car registration in the UK to 738 units, while its sibling Land Rover also posted double-digit growth of 11.71% YoY to 1,517 units in February 2024. YTD, Jaguar and Land Rover posted growth of a whopping 54.63% YoY and 36.4% YoY respectively on their home ground.

Also, earlier in March, JLR announced it would generate more than a quarter of its UK electricity from new onsite and near-site renewable energy projects, slashing energy bills and reducing reliance on grid energy. JLR's new off-grid energy projects aim to produce almost 120 Mega Watts (MW) of renewable energy at their peak, enough to power nearly 44,500 homes or charge 2.7 million I-PACE batteries annually.

Apart from this, Tata Motors sales including domestic and international, stood at 86,406 vehicles, compared to 79,705 units during February 2023.

The next big thing in Tata Motors is its plan for splitting in the ratio of 1:2.

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.

The demerger is a logical progression of the subsidiarisation of PV and EV businesses done earlier in 2022 and shall further empower the respective businesses to pursue their respective strategies to deliver higher growths with greater agility while reinforcing accountability, it said.

Further, developments in the demerger plan will be keenly watched during its Q4 announcement for FY24 which is most likely anywhere between April to May.

While CLSA's target does indicate double-digit returns in Tata Motors in the near term, however, the highest target price in the auto player's stock is somewhere between Rs 1,170-Rs 1,190.

As of the latest, Motilal Oswal has kept a neutral stance with a target price of Rs 1,000 on Tata Motors. While Sharekhan and KR Choksey have kept much higher target prices of Rs 1,188 and Rs 1,178 on Tata Motors ahead.

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.