Tata Motors, a leading player in the automotive sector and a part of the Tata Group has recently experienced a significant drop in its stock value, falling by 16% from its record high. However, the tide seems to be turning as Tata Motors stock has now gained momentum, reaching ₹979. The recent rally has caught the attention of brokerage house Emkay Global Financial Services, which has upgraded its rating from ‘Add’ to ‘Buy’, offering investors a renewed opportunity.
Stock Rebounds After Recent Slump, Lowest Valuation Among OEMs
Over the past few days, Tata Motors’ stock has been under pressure due to factors such as heavy discounts and sluggish demand from both the Chinese market and the domestic commercial and passenger vehicle segments. This decline had positioned Tata Motors as the least valued stock among Original Equipment Manufacturers (OEMs). Despite this, Emkay Global Financial Services sees this as a strong buying opportunity, especially after the stock’s 18% fall from its peak.
Target Price Set at ₹1,175 – A 22% Upside from Current Levels
Emkay Global Financial Services has projected a target price of ₹1,175 for Tata Motors stock, indicating a potential upside of 22% from its current price. According to the brokerage, the valuation remains attractive even though the demand outlook has been weak in certain regions. China’s contribution to Tata Motors’ premium brand Jaguar Land Rover (JLR) is around 24%, relatively smaller compared to rivals like BMW, where China accounts for 32% of the market. The brokerage is optimistic about the company’s profitability and debt outlook, noting that the balance sheet remains robust.
Improving Margins Expected to Drive Growth
Tata Motors is expected to see strong growth in margins, driven by several factors. The Indian Commercial Vehicle (CV) sector’s outlook is improving, supported by better profitability for fleet operators and continued pricing discipline. These developments, combined with a healthier balance sheet, create a positive environment for Tata Motors’ future performance.
Impact of Weak Domestic Passenger Vehicle (PV) Market
Despite the positive outlook, some concerns remain regarding the domestic Passenger Vehicle (PV) market. Emkay Global has observed a decline in retail sales, increasing inventory levels, and rising discounts across the industry. The brokerage expects the outlook for PVs to weaken further after the upcoming festive season. However, Tata Motors may outperform the industry due to its low inventory levels and successful new launches, which have contributed to about 10% of dealer volumes in certain markets.
UBS Issues a ‘Sell’ Rating Amid JLR Concerns
While Emkay Global remains bullish on Tata Motors, another brokerage house, UBS, has taken a more cautious stance. UBS has issued a ‘Sell’ rating on Tata Motors, warning that the stock could face pressure in the coming months. The brokerage predicts that the stock could fall to ₹825, driven by potential risks in Tata Motors’ premium brand JLR and its domestic operations.
UBS values JLR at ₹340, with the Indian CV and PV segments at ₹280 and ₹170, respectively. The brokerage sees risks of margin reduction in both JLR and the Indian PV segment, particularly its electric vehicle (EV) division, if performance fails to meet expectations.
JLR’s Order Backlog Below Pre-Covid Levels
A key concern raised by UBS is the declining order backlog for JLR, which is now below pre-Covid levels. The brokerage notes that the lack of new internal combustion engine (ICE) and hybrid model launches, along with increasing discounts on premium models like Range Rover, could impact JLR’s financial performance in the near future. UBS projects a challenging financial situation for JLR by FY26, as sales growth remains moderate and discounts rise.
In addition, Tata Motors’ CV and PV segments in India have also shown signs of underperformance, with CV demand faltering and passenger vehicle growth lagging behind regional peers. Despite these concerns, Tata Motors continues to capture market attention, with some seeing the current dip as a valuable opportunity for long-term investors.
(Disclaimer: The views or advice on the stock are given by the brokerage house. These are not the personal views of Invest Policy. There are risks in the market, so take expert advice before investing.)
