Tata Motors Share Price Updates: Tata Motors shares rise 0.20%, brokerages reaffirm bullish stance

A research on Tata Motors highlights the company’s strong performance across key segments in FY24, despite looming challenges, particularly within its Jaguar Land Rover (JLR) division. The focus lies on the ongoing demerger process, as management views the separation of commercial vehicle and passenger vehicle businesses as a strategic move. With both segments having achieved growth, the demerger aims to unlock synergies within the PV, EV, and JLR realms. The NCLT scheme is set to be presented before the board for approval.

Tata Motors expanded its capacity by operationalizing the Sanand-2 facility. The factory was retooled in 12 months and began production in Jan’24. It is currently producing 6-7 units per month, with an expected increase to 13-14k units soon. The Sanand-2 facility provides an annual capacity of 300k units, expandable to 420k units, bringing our overall capacity to over 1m units. The plant features high levels of digitization and automation. It will leverage synergies with its adjacent facility and the nearby vendor park. The shares were up by 0.40% to Rs 991 on the BSE.

According to a report by Motilal Oswal on Tata Motors, India’s battery raw material landscape faces challenges with domestic sourcing of critical components like cathode and anode materials, dominated by China’s 70% production share. Tata Group is exploring opportunities in manufacturing lithium iron phosphate (LFP) cathodes, addressing the scarcity of cathode manufacturers despite a proliferating battery industry and falling raw material prices due to weak EV demand. Tata Motors localized its auto component supply chain, excluding cells and semiconductors, with plans to design cells in-house by FY25, develop electric compressors with 50% localization, and fast chargers with TCS by November 2024.

A report by Motilal Oswal stated, “We expect Jaguar Land Rover (JLR) to maintain stable margins over FY24-26, despite facing rising cost pressures due to investments in demand generation, a normalizing product mix, and the ramp-up of electric vehicles (EVs), which are anticipated to be margin-dilutive. In India, the commercial vehicle (CV) and passenger vehicle (PV) businesses are experiencing a moderation in demand, leading us to project flat margins for the Indian operations during this forecast period. Although Tata Motors Limited showcased robust performance across its key segments in FY24, the aforementioned challenges could impact its future performance. The stock is currently trading at 17x and 14.6x FY25E and FY26E consolidated EPS, respectively, and at 5.9x and 4.9x EV/EBITDA. We reiterate a Neutral rating with an FY26E sum-of-the-parts (SOTP)-based target price (TP) of ₹955.”

The company plans to increase its passenger vehicle (PV) capacity to around 1 million units by ramping up the Sanand plant-2 and aims to raise its market share in PVs to 20% by FY30 from the current 14%. This will be achieved by addressing 80% of the PV market, up from the current 52%, with new models like Curvv, Sierra, and Avinya, as well as a corresponding electric vehicle (EV) portfolio of 10 models. Tata Motors also aims to achieve 10% EBITDAM in PVs and become EBITDA neutral in EVs by FY26.

Tata Motors, according to a report by ICICI Securities, is focusing on achieving a structurally profitable and sustainable growth path for its India business. During the Investor Day held on June 11, 2024, key takeaways included targeting a 4-5% TIV CAGR in commercial vehicles (CVs) over FY24-29, with an aim to improve market share, maintain EBITDAM above 10%, and achieve consistent free cash flow (FCF) generation.