Tata Motors shares hit 52-week high for sixth session; can they touch Rs 625 mark?

Shares of Tata Motors hit a fresh 52-week high for the sixth consecutive session today after the Indian auto major turned profitable on a year-on-year basis for the quarter ended March 2023. The company reported a consolidated net profit of Rs 5,408 crore in Q4 compared with a loss of Rs 1,033 crore in the year-ago period. On a sequential basis, Tata Motors reported a second consecutive quarterly profit, helped by price hikes and strong demand for cars in its luxury Jaguar Land Rover (JLR) stable as well as for commercial trucks.

Tata Motors stock zoomed 4.17%  to Rs 537.15 against the close of Rs 515.65 in the previous session. In the current session, Tata Motors stock opened at Rs 525 on BSE.

Sentiment around the stock was also bullish after the auto major declared its first dividend in nearly seven years, of Rs 2 per share. Ahead of the Q4 and fiscal earnings, Tata Motors' scrip on BSE closed 0.8% higher at Rs 515.65 on Friday.

The auto stock has been gaining for the last six sessions. Market cap of the firm stood at Rs 1.76 lakh crore. Total 11.61 lakh shares changed hands amounting to a turnover of Rs 61.74 crore on BSE. Tata Motors stock has gained 31.15% per cent in a year and risen 36.64 per cent in 2023. Tata Motors stock hit a 52-week low of Rs 375.50 on December 26, 2022.  

In terms of technicals, the relative strength index (RSI) of Tata Motors stood at77.5, signaling it's trading in the overbought zone. Tata Motors stock has a one-year beta of 1.3, indicating very high volatility during the period. Tata Motors shares are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

Here’s a look at what brokerages and analysts said on the prospects of the Tata Group stock.

Prabhudas Lilladher has assigned a price target of Rs 605 post Q4 earnings.

"We maintain our positive stance given (1) JLR's volume ramp-up resulting in strong revenue, profitability and FCF (aided by high order book), 2) CV segment (on domestic side) benefitting from ongoing upcycle, operating leverage and tailwinds from lower commodity costs & lower discounting and (3) strong market share in PV segment (13.5% vs 8% in FY21) led by revamped portfolio, rising SUV share and rising EV penetration. We expect revenue/EBITDA CAGR of 12%/32% over FY24/25E. Retain 'BUY' with SoTP based target price of Rs 605 (Mar-25) (previous Rs. 590)," said the brokerage.

JM Financial has assigned a target price of Rs 625 for the Tata Motors stock.

"Strong FCF generation is expected to support higher investments towards electrification at JLR. Tata Motors’ EV portfolio is leading the domestic EV space. Improving margins for both domestic CV and PV segments augurs well for the overall profitability of the company. The company targets to turn net debt free by FY25. Maintain BUY with Mar’24 SOTP of Rs 625 (standalone / JLR valued at 10x /2.5x EV/EBIDTA). Slower ramp-up in production, slowdown in key global markets and inherent risk in evolving EV technologies are the key risks," said the brokerage.

Motilal Oswal is bullish on the stock with a targte price of Rs 590.

"We upgrade our consol. EPS by 13%/6% for FY24E/25E to factor in: a) JLR’s volume ramp up as well as moderation in certain costs, and b) margin improvements in India businesses. BUY a TP of Rs 590, " said the brokerage.

Emkay Global gave a target price of Rs 565 on the stock.

"Tata Motors reported a mixed performance for 4QFY23. The company's India-CV business disappointed with muted margin expansion (150bps QoQ; 390bps YoY) to 10.3% (vs. est. of 10.8%), despite benefits of operating leverage (21% QoQ higher volumes), softening commodity prices and lower discounts. Whereas, the India-PV business and JLR reported healthy margin expansion of 40bps QoQ/40bps YoY and 270bps QoQ/200bps YoY to 7.3% and 14.6%, respectively. We maintain our BUY recommendation on the stock, with an SOTPbased TP of Rs565/share (Rs550 earlier), based on FY25E," said Emkay. 

Abhishek Gaoshinde, Deputy Vice President Research at Sharekhan by BNP Paribas said, "Tata Motors came out with strong print in Q4FY23 led by strong operating performance in all of its three key verticals, given this was the consecutive second quarter when JLR, CV and PV business simultaneously reported sequential improvement in EBITDA margin. Sequentially, net automotive debt declined to Rs 43.7k cr from Rs 57.5k cr, the management is continuously focusing on reduction of net automotive debt going forward. JLR business is expected to maintain its traction in FY24 on gradual ease of semiconductor chip issue and healthy order book.

We maintain our Buy rating on the stock with a revised SOTP-based PT of Rs. 600, on

(1) recovery in production in the JLR business on a gradual ease in chip supply situation and its focus on global EV space,

(2) cyclical uptick in the CV cycle with hope of margin expansion due to its focus on profitability,

(3) market share gain in the PV segment along with a  leadership position in the electric car space,

(4) reduction in net automotive debt, and

(5) hope of healthy value unlocking in its non-core assets."

Pravesh Gour, Senior Technical Analyst, Swastika Investmart has a buy call on Tata Motors. 

"The recent rise of Tata Motors is well known. It has been consolidating over the past 1.5 years after it overcame the crucial 360 resistance level. The stock has held above the Rs 360 level despite this consolidation and is currently exhibiting signals of a bullish breakout from a flag formation, which points to a potential expansion phase. Looking ahead, the stock's previous high of Rs 606 appears to be a likely target in the short term, with the possibility of reaching Rs 750 in the medium term. However, the 490 level, which coincides with the 20-day moving average, is expected to act as a strong support level in case of a downside correction," said Gaur. 

Gaurav Bissa, VP, InCred Equities said, "Tata Motors witnessed a strong breakout from symmetrical triangle pattern ahead of the quarterly earnings and is now approaching the pattern target of Rs 550. At the current levels, fresh entry is not advised. Another set of breakouts will be confirmed once it closes above Rs 550 levels. The stock reversed from this resistance in the last two occasions. Thus, the stock can be bought once the breakout is confirmed. Traders who bought the stock at lower levels can use Rs 510 as their trailing stoploss."

Abhijeet from Tips2trade said, "Even though Q4FY23 results have been very good, Tata Motors stock price is overbought on the Daily charts. Investors should book profits at current levels and wait for a dip near Daily support of Rs 480 to buy for better returns. Strong resistance will now be at Rs 538."

Sonam Srivastava- Founder at investment advisory firm Wright Research said, "Tata Motors' Q4 results have significantly outperformed expectations, largely driven by positive margins in its Jaguar Land Rover (JLR) segment and a recovery in domestic commercial vehicle volumes. The company's aggressive focus on EVs is also seen as a key trigger for re-rating. Improvement in product mix, coupled with lower input costs, contributed to these robust numbers. The easing of the chip supply crisis and softening of raw material prices are also advantageous for the company. The company's bullish outlook, highlighting strong demand, the ramp-up in JLR production, and successful debt reduction, adds to the positive sentiment. Several brokerages have consequently revised their target price upward. However, investors should remain cautious about potential risks, such as rising interest rates impacting consumer sentiment in key markets. In the medium to long term, Tata Motors seems well-positioned to deliver healthy returns, given its strong operational performance, market leadership in the EV segment, and favourable industry environment."

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