2:1 Split: Tata's Auto Stock To Buy In FY25 Before Spliting: Rs 1,075 TP By Prabhudas, Rs 1,133 TP By CLSA

As the financial year 2023-24 is ending, Tata Group-backed 79-year-old automobile player, Tata Motors is best positioned for buying or accumulating on BSE and NSE in the next fiscal. The first trading day of FY25 is commencing on April 1, 2025, and two brokerages are positive on Tata Motors' fundamentals. Accordingly, they recommend accumulating further or making fresh buying. These brokerages are Prabhudas Lilladher and CLSA.

Further, it also needs to be noted that Tata Motors is the top performer of Nifty 50 in FY24 with triple-digit gains.

Prabhudas Lilladher is the latest to make recommendations for Tata Motors' stock price. The brokerage revealed that its analysts met with Tata Motors' management to understand the rationale behind the demerger and receive general business updates.

After the meeting, Prabhudas concluded that Tata Motors 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.

Although Prabhudas expects limited benefits in terms of value unlocking through the demerger development, Tata Motors' confidence to achieve sustainable recovery in both the India PV and JLR assured the brokerage.

Prabhudas analysts remain positive on Tata Motors due to factors like -- 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.

Accordingly, Prabhudas has adjusted its 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. Also, the brokerage has increased its EV/EBITDA multiple for the India PV business to 13x to align it more closely with Maruti Suzuki.

Following this, Prabhudas Lilladher revised its target price on Tata Motors upside to Rs 1,075, however, downgraded its recommendation tone to ACCUMULATE from BUY.

Last week, 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.

Tata Motors shares are 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.

In its rationale, Tata Motors pointed out that 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

Tata Motors Share Price:

The heavyweight stock which was the top gainer of Nifty 50 in 2023, ended the fiscal FY24 at Rs 993 apiece, up by 1.5% on March 28 with a market cap of nearly Rs 3.30 lakh crore on BSE.Tata Motors is currently up by 148% from its 52-week low of Rs 401.10 apiece. Overall, in FY24, the stock surged by 136% on BSE.

Meanwhile, on the NSE, Tata Motors is the top gainer in Nifty 50. Tata Motors' 365-day change in stock is an upside of 143%. The stock stood at Rs 995 apiece on the last trading day of FY24. Its 52-week high and low on NSE is at Rs 1,065.60 and Rs 400.45 apiece respectively.

The stock has touched an all-time high of Rs 1,065.60 apiece already. It means that both Prabhudas Lilladher and CLSA's TP are fresh new record highs expected in the auto company.

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.