The biggest winner of Nifty 50 in 2023, Tata Motors is back in trends. With double-digit gains in 2024 so far, this 79-year-old automobile giant of Tata Group has seen volatile trade in the past month. There has been a steep correction in a month. At the latest, KR Choksey has recommended ACCUMULATE on Tata Motors, which is a downgrade rating from BUY call with target price also lowered to Rs 1,043.
Tata Motors Share Price:
On BSE, this auto heavyweight stock ended at Rs 960.75 apiece on May 24, down marginally with a market cap of Rs 3,19,328.22 crore. The stock's 52-week high and low is at Rs 1,065.60 and Rs 509.10 apiece respectively.
From May 20-24, the stock edged higher by 1% on BSE. But on a month-on-month basis, the stock dropped by 4%. Hence, Tata Motors shares have consolidated significantly. Nonetheless, YTD, the stock is up by 21.5%.
Tata Motors Share KR Choksey Views:
In its latest research note, KR Choksey highlighted that Tata Motors management anticipates a slow performance for MHCV in Q1FY25E, with demand expected to rise in the latter half of Q2FY25E. For FY25E, the Company expects either stable growth or a slight decline in the MHCV sector, with higher tonnage vehicles experiencing stronger growth than other segments.
Further, the brokerage highlighted that the company's management has indicated that marketing expenditures will increase in the future, in a bid to bolster JLR's order book. The EBIT margin for the JLR segment in FY25E is projected to remain flat.
Moreover, Tata Motors expects that EBIT margins in FY25E will stay consistent with FY24. However, with the introduction of new products in the market, the Company expects margin improvement in FY26E. Also, the company aims to maintain the target of achieving zero net debt by the end of FY25E. Lastly, the company is expecting an investment of GBP 3.5 Bn in FY25E. Approximately 62% of these investments were capitalized in JLR.
Accordingly, KR Choksey's note said, "We lower our EV/EBITDA multiple for the JLR segment to 3.2x FY26E EBITDA (4.0x earlier) on the back of challenges to growth at the JLR unit. We retain the valuation of Chery-JLR JV business at 2.4x EV/EBITDA, TML-CV at 14.0x, and TMLPV at 16.0x, respectively as we believe the prospects for these segments remain intact."
Furthermore, the brokerage added, "We lower our target price to Rs 1,043 per share (previously: INR 1,178), including INR 42.00 for Tata Technologies. Given the near-term challenges for JLR and the Company, we downgrade our rating on the shares of Tata Motors to "ACCUMULATE" from "BUY"."
In the last quarter of FY24, Tata Motors reported 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.
On the Q4 performance, KR's note said, TTMT generated modest Q4FY24 results, driven by volume expansion and market share gains.
KR Choksey also added, "We anticipate the growth momentum to persist, albeit at a slower pace, primarily due to subdued growth expected in the domestic PV and CV sectors, amid industry-related obstacles.
Tata Motors Shares Key Triggers:
The next big triggers for Tata Motors will be its dividend payout for FY24, and the development of the demerger of itself into two aka 1:2.
Earlier in May, Tata Motors announced a final dividend of 300% amounting to Rs 6 per share to investors holding its ordinary shares, while it announced a final dividend payout of 310% worth Rs 6.10 per share having a face value of Rs 2 each, higher than the dividend that ordinary shareholders will get.
Meanwhile, 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.
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.
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