2:1 Split, Dividend Pay Soon: At ROE 26.22%, Tata's Auto Stock To Buy For Robust 24% Gains; Big Update Issued

Tata Motors, the automobile giant of Tata Group, ended the trading week of June 10-14 on a positive note on BSE and NSE. This comes at a time the stock turned ex-dividend for a 300-310% dividend payout for FY24. Tata Motors which was the top Nifty gainer in 2023, has risen by 26% on BSE in 2024 so far. Brokerages have recently upgraded their recommendations on Tata Motors, with the highest target price at Rs 1,235, which signals strong potential gains of 24% from CMP.

Tata Motors share price ended last week at Rs 993.40 apiece with a market cap of Rs 3,30,204.07 crore. The weekly performance was with an upside of over 1%. The stock is floating near its 52-week high of Rs 1,065.60 apiece.

Tata Motors turned ex-dividend on June 11 for final dividend of ₹6.00 per Ordinary Share of the face value of ₹2 each (i.e.,@ 300%) (comprising of ₹3.00 normal dividend and ₹3.00 special dividend); and ₹6.20 per 'A' Ordinary Share of the face value ₹2 each (i.e.,@ 310%) (comprising of ₹3.10 normal dividend and ₹3.10 special dividend) for the financial year ended March 31, 2024.

The date of the payment of the dividend is fixed on or before June 28, 2024.

After the dividend payout, the focus will shift to the demerger of the 2:1 ratio in Tata Motors. Yes, Tata Motors will be split into two listed entities soon.

The board of the auto giant 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.

BUY/ACCUMULATE/ADD Tata Motors Share Price:

Sharekhan On Tata Motors:

An EV battery cell plant within the group would help the company in achieving speedy product validation and reduce the dependence on the third party suppliers. While hydrogen fuel cell technology is at a nascent stage, TML has been making efforts to secure its growth prospects in hydrogen space in future. Post incorporating Q4FY24 performance in our estimate, We maintain our Buy on Tata Motors Ltd (TML) with a revised PT of Rs 1235 on expecting continued improvement in JLR, PV and CV businesses and reduced net automotive debt.

Elara Capital On Tata Motors:

While CV profitability is likely to remain healthy, we continue to monitor volume in the near term as it has peaked compared to the FY19 levels. We are impressed by TTMT's robust EV portfolio, resulting in a better customer profile than ICE (~25% first-time buyers and ~22% female customers). We await details on JLR at its analyst meeting on 19 June in the UK. TTMT would continue to benefit from deleveraging, given FCF generation in India and JLR.

We retain Accumulate with a SOTP-based TP of INR 1,100. We value India CV at 11x June 2026E EV/ EBITDA; India PV (ICE+EV) at 15x June 2026E EV/ EBITDA and JLR at 2.5x June 2026E adj EV/ EBITDA.

Prabhudas Lilladher On Tata Motors:

We attended Tata Motors' annual analyst meeting where the company gave a detailed overview of its Commercial Vehicle (CV), Passenger Vehicle (PV) and Electric Vehicle (EV) businesses and its growth outlook. It aims to be net automotive debt-free for the consolidated business by FY25E. The company believes the proposed demerger of the CV business will help improve its management and focus. The company aims to improve its EBITDA margin in the next few years while focusing on cost optimization and product mix improvement. In the PV+EV business, the company aims to increase the addressable market with a slew of new launches on the ICE & EV platform and increase its EBITDA margin to 10% and market share to 18-20% by FY27E/FY30E, respectively.

We remain positive on Tata Motors based on the (1) healthy growth outlook across business verticals, (2) capex proposed for respective businesses to deliver a sustainable product portfolio, (3) market share expansion in the SCVPU and CPV business, the (4) sustained growth rate in the downstream/spares business. Hence, we keep our estimates unchanged and maintain our 'ACCUMULATE' rating with a TP of Rs1,089 based on SoTP valuation.

Emkay Global On Tata Motors:

After the analyst day, Emkay highlighted KTAs: 1) Dom. CV industry has now absorbed various past disturbances with a growth outlook improving on favourable macros; TTMT to improve revenue leadership with a strong double-digit margin and healthy FCF. 2) Aims to grow 2x of underlying PV industry on new nameplates in ICE, CNG, and EVs, with expansion in the addressable market to 80% by FY30 vs 53% now (EVs to form 30% of the portfolio by FY30); targets profitability improvement, with double-digit margin in the combined PV and EV business by FY30 (vs. double-digit in ICE and below breakeven in EVs now).

Improved growth prospects in CVs prompt an upgrade in our target multiple to 12.5x, leading to a revised SoTP-based TP of Rs1,050/sh and an upgrade to ADD (Rs950 TP, REDUCE earlier); our estimates are unchanged.

On Saturday, Tata Motors celebrated 7 lakh unit sales of India's No. 1 SUV - Nexon, in its 7th year. Launched in 2017, Nexon has achieved the distinction of being India's largest-selling SUV for three consecutive years from 2021 to 2023. Nexon was India's 1st GNCAP 5-star rated vehicle in 2018, which set the benchmark for all Indian automobiles to follow. The legacy has continued ever since. In Feb 2024, the new-gen Nexon received its GNCAP 5-star rating as per the enhanced 2022 protocol, which was soon followed by the Nexon. ev achieving the prestigious 5-star rating from Bharat-NCAP, this month.

All Tata Motors passenger vehicle dealers and showrooms across the country are organising special events and customer meets to celebrate the Nexon. With benefits up to Rs. 1 lakh (depending on model and variant) for customers who have booked and await delivery of their Nexon along with those booking afresh or wanting to upgrade their existing Nexon to its new avatar, this is the ideal time for all those waiting to get their hands on India's No. 1 SUV.

The Nexon comes fully loaded with a spectrum of cutting-edge features, including state-of-the-art connectivity solutions, upgraded safety enhancements, and personas, offering a unique experience and is way ahead in its segment. It exhibits a modern and premium design language that radiates sophistication and dynamism and always makes a commanding statement on the road. The enthusiastic response from customers and fans has made it the true leader in the most competitive segment of the Indian auto industry.