1:2 Split Coming Up: Tata's 79-Year-Old Auto Giant To Ride Up; 5 Brokerages Like This Stock, 7-18% Rise Seen

Ahead of splitting into a 1:2 ratio, automobile giant, Tata Motors is likely to ride higher on stock exchanges due to its strong position operationally. This 70-year-old Tata Group-backed company is set to demerger into two separate listed entities, hence a 1:2 stocks split. The latest to recommend positioning in Tata Motors is Prabhudas Lilladher.

Prabhudas Lilladher believes all businesses of Tata Motors are in a strong position to self-sustain and grow. Also, it is targeting 25-30% of the EV mix in India's PV portfolio in 2-3 years.

On BSE, Tata Motors' share price was at Rs 1007.05 apiece, with a market cap of nearly Rs 3.36 lakh crore. Tata Motors has been a top performer of stock exchanges since last year, and 2024 has so far been bullish as well.

YTD. Tata Motors' share price is up by 27.4%, while in six months, the stock has gained by a massive 63% on BSE. In a year, Tata Motors has gained by a whopping 118.43%, emerging as a multibagger. And it looks like Tata Motors is moving closer to its target prices in the range of Rs 1,075 to Rs 1,190. The latest to like Tata Motors is Prabhudas Lilladher.

In its research report, Prabhudas Lilladher said, "We met with Tata Motors' management to understand the rationale behind the demerger and receive general business updates. TTMT is on track to meet its outlined operational metrics, viewing the demerger as having no impact on these objectives. TTMT expects demerger to offer greater manoeuvrability, aiming for both entities to operate in a self-sustaining manner."

Further, Prabhudas remains positive on Tata Motors based on: 1) JLR's volume ramp-up, leading to strong revenue, profitability, and FCF; 2) a focus on increasing market share in the PV segment through model launches and rising EV penetration; and 3) profitable and robust FCF performance, driven by margin
expansion in the CV segment. We have adjusted our estimates primarily for the India businesses, resulting in a consolidated EPS change of 0.4% for
FY24-FY26E, with an estimated CAGR of 12.4% over the same period.

"We have increased our EV/EBITDA multiple for the India PV business to 13x to align it more closely with Maruti Suzuki. Consequently, our SoTP-based TP
has been revised upwards to Rs. 1,075. However, given the stock's sharp runup over the last three months, we are downgrading our recommendation to
'ACCUMULATE' from 'Buy'," Prabhudas said.

Apart from Prabhudas, a leading global brokerage, CLSA maintained its BUY on Tata Motors. 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.

Also, ICICI Direct suggests HOLD on the stock for a target of Rs 1,085. But brokerages like Sharekhan and KR Choksey have set the highest target on Tata Motors to Rs 1,178 and Rs 1,188 with BUY call.

The progress on Tata Motors' demerger plan ahead alongside Q4 results for FY24 will most likely swirl sentiments in Tata Motors' share price. The company's stock is soon going to be split into a 1:2 ratio. The auto giant will be demerged 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.

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.