Tata Motors stock down 38% from July high; is it a value buy? LKP shares target price
Tata Motors share price: The stock is trading at 11.1 times FY27E consolidated earnings estimates. LKP Securities' target price on the stock suggests nearly 31 per cent upside over Friday's trading price of Rs 742.25.
- Dec 20, 2024,
- Updated Dec 20, 2024 11:15 AM IST
Shares of Tata Motors Ltd are down about 38 per cent from their July high of Rs 1,179.05. LKP Securities finds the Tata group stock a 'value buy'. It believes the domestic commercial vehicle (CV) demand may pick-up in H2 and said the recent launches are expected to support growth. The domestic brokerage suggested a fresh target price of Rs 970 on the stock, which suggests nearly 31 per cent upside over Friday's trading price of Rs 742.25.
"The stock is trading at 11.1 times FY27E consolidated earnings estimates. It has corrected by approximately 40 per cent from its 52 week highs. Considering our optimistic view on the stock, we now find it to be attractive from these levels. Hence, it is a value buy. A slowdown in key global markets remains a monitorable," LKP said.
In the quarter gone by, Tata Motors' British arm JLR reported Ebitda margins of 11.7 per cent, down 350 basis points due to negative operating leverage and higher marketing spends. India business (CV+PV) Ebitda margins stood at 9.5 per cent.
"While the US market continues to be healthy, demand environment in EU remains muted. The management indicated of strong pick-up in H2 led by easing supply constraints and astute cost management. Marketing spends are expected to remain elevated. In the domestic PV segment, TaMo witnessed strong growth during festive season. Recent/new launches are expected to support growth. Domestic CV demand is also expected to pick-up during H2," it said.
The brokerage expects Tata Motors' consolidated Ebitda estimates for FY25-27E to be driven by lower gross margin assumptions for JLR due to weak demand trends for luxury cars, especially in China and Europe, resulting in higher discounts. LKP Securities has lower volumes assumptions of the PV and CV businesses due to weak retail sales and higher inventory levels, partly offset by higher profitability assumptions in the PV and CV segments.
"While we believe there will be near-term headwinds for all three businesses, but we expect the (1) domestic CV business to recover from FY26E, led by an increase in government spends on infra and construction projects, (2) the JLR business to gradually improve in H2FY25, led by normalization of supply chain issues and (3) market share recovery in FY26-27E in the PV segment, on the back of new launches in multiple powertrains," it said.
Shares of Tata Motors Ltd are down about 38 per cent from their July high of Rs 1,179.05. LKP Securities finds the Tata group stock a 'value buy'. It believes the domestic commercial vehicle (CV) demand may pick-up in H2 and said the recent launches are expected to support growth. The domestic brokerage suggested a fresh target price of Rs 970 on the stock, which suggests nearly 31 per cent upside over Friday's trading price of Rs 742.25.
"The stock is trading at 11.1 times FY27E consolidated earnings estimates. It has corrected by approximately 40 per cent from its 52 week highs. Considering our optimistic view on the stock, we now find it to be attractive from these levels. Hence, it is a value buy. A slowdown in key global markets remains a monitorable," LKP said.
In the quarter gone by, Tata Motors' British arm JLR reported Ebitda margins of 11.7 per cent, down 350 basis points due to negative operating leverage and higher marketing spends. India business (CV+PV) Ebitda margins stood at 9.5 per cent.
"While the US market continues to be healthy, demand environment in EU remains muted. The management indicated of strong pick-up in H2 led by easing supply constraints and astute cost management. Marketing spends are expected to remain elevated. In the domestic PV segment, TaMo witnessed strong growth during festive season. Recent/new launches are expected to support growth. Domestic CV demand is also expected to pick-up during H2," it said.
The brokerage expects Tata Motors' consolidated Ebitda estimates for FY25-27E to be driven by lower gross margin assumptions for JLR due to weak demand trends for luxury cars, especially in China and Europe, resulting in higher discounts. LKP Securities has lower volumes assumptions of the PV and CV businesses due to weak retail sales and higher inventory levels, partly offset by higher profitability assumptions in the PV and CV segments.
"While we believe there will be near-term headwinds for all three businesses, but we expect the (1) domestic CV business to recover from FY26E, led by an increase in government spends on infra and construction projects, (2) the JLR business to gradually improve in H2FY25, led by normalization of supply chain issues and (3) market share recovery in FY26-27E in the PV segment, on the back of new launches in multiple powertrains," it said.