1:2 Split: Tata's Auto Stock Is Rs 28 Away From 52-Week Low, 0% Returns YTD; LKP Recommends BUY For Rs 970 TP

Tata Group-backed automobile giant, Tata Motors Ltd has witnessed massively selling pressure in the past few months, leading up to 0% returns in year-to-date. The stock's weekly, monthly, half-yearly and YTD performance is in deep red. Currently, the stock is breathing at Rs 724 and is just Rs 28 away from hitting its 1-year low price level. Does that make Tata Motors undervalued, and is it the right time to buy the stock? What's the next target price and driving factor for Tata Motors ahead?

Tata Motors Share Price:

On December 20th, Tata Motors' share price plunged by 2.73% to end at Rs 724 on BSE, with a market cap of Rs 2,66,513.44 crore. This is just Rs 28.1 from its 52-week low of Rs 695.90 apiece on BSE. The stock's ranking in the top 100 most-valued companies listed on BSE has also declined drastically.

Stock

The auto heavyweight stock had touched its 52-week high of Rs 1,179.05 apiece by the end of July 2024. From its 1-year high, currently, Tata Motors is down by 39% approximately.

In the trading week from December 16th to 20th, Tata Motors stock dipped by 8.18% on BSE, while in the 1-month and 6 months, the performance is down by 6.4% and 24.7% respectively. YTD, the stock is down by 8.41%, hence zero returns in 2024 so far.

Tata Motors is still an attractive bet, and the latest decline has led to a buy-on-dip opportunity. The latest to recommend buying on Tata Motors is LKP Securities. The broker has set a Rs 970 target price, which hints at a nearly 34% potential upside ahead.

LKP Securities on Tata Motors:

LKP Securities estimates the consolidated EBITDA of Tata Motors for FY25-27E to be driven by (1) lower gross margin assumptions for JLR due to weak demand trends for luxury cars, especially in China and Europe, resulting in higher discounts and (2) lower volume assumptions of the PV and CV businesses due to weak retail sales and higher inventory levels, partly offset by higher profitability assumptions in the PV and CV segments.

In its report, LKP said, "While we believe there will be near-term headwinds for all three businesses, we expect the (1) domestic CV business to recover from FY26E, led by an increase in government spending on infra and construction projects, (2) the JLR business to gradually improve in H2FY25, led by normalization of supply chain issues and (3) market share recovery in FY26-27E in the PV segment, on the back of new launches in multiple powertrains. We revise our TP to ₹ 970."

" The stock is trading at 11.1x FY27E consolidated earnings estimates. The stock has corrected by approximately 40% from its 52-week highs. Considering our optimistic view on the stock, we now find it to be attractive from these levels. Hence it is a Value BUY! Slowdown in key global markets remains a monitorable," the brokerage added.

Tata Motors Demerger:

The auto player is set to split in the ratio of 1:2. The company is planning the demerger of Tata Motors 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 Price Hike:

Earlier, the company announced a price hike of approximately 2% across its trucks and buses portfolio which is part of its commercial vehicle segment. The price increase will come into effect from 1st January 2025.

Part of the $165 billion Tata group, Tata Motors, a $44 billion organization, is a leading global automobile manufacturer of cars, utility vehicles, pick-ups, trucks, and buses, offering an extensive range of integrated, smart, and e-mobility solutions.