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Tata Motors shares: Rs 500 target in sight despite chip shortage worries

Tata Motors shares: Rs 500 target in sight despite chip shortage worries

Tata Motors stock gained 4.16 percent intraday today to Rs 443 against the previous close of Rs 425.50. Tata Motors shares have gained after four days of consecutive fall.

Tata Motors stock has been affected by a spike in the cost of commodities and a loss in production due to shortage of semiconductors. Tata Motors stock has been affected by a spike in the cost of commodities and a loss in production due to shortage of semiconductors.

The stock of Tata Motors is in an uptrend; believe brokerages, despite the firm's UK arm Jaguar Land Rover (JLR) hit by semiconductor shortages. The Indian automaker is hugely dependent on JLR, which contributes 67 per cent to the revenues of the firm. This year, negative cues emanating from the Russia-Ukraine war and the economic slowdown after Covid-19 lockdowns across the world have affected the stock. The large cap stock has gained 47 per cent in a year but lost 9 per cent in 2022.

The stock has also been affected by a spike in the cost of commodities and a loss in production due to shortage of semiconductor. In today's session, the stock gained 4.16 percent intra day to Rs 443 against the previous close of Rs 425.50. Tata Motors stock has gained after four days of consecutive fall.

The stock is trading higher than 100-day moving averages but lower than 5-day, 20-day, 50-day and 200-day moving averages. Total 5.91 lakh shares of the firm changed hands amounting to a turnover of Rs 25.93 crore on BSE. The market cap of the firm stood at Rs 1.45 lakh crore on BSE. Tata Motors stock hit a 52-week high of Rs 536.50 on November 17, 2021 and a 52-week low of Rs 293.05 on September 21, 2021.

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Motilal Oswal is bullish on the stock. It has maintained a buy call with target price of Rs 514 against the current market price of Rs 426. The fresh target price amounts to an upside of 21 per cent against the current level.

"Tata Motors should witness a gradual recovery as supply-side issues ease (for JLR) and commodity headwinds stabilise (for the India business). It will benefit from: a) a macro recovery, b) company-specific volume and margin drivers, and c) a sharp improvement in FCF and leverage in both JLR as well as the India business. The stock trades at 16.8 times FY24E consolidate P/E and 4.2x EV/EBITDA. We maintain our Buy rating, with a target price of Rs 520 per share (Jun'24E based SoTP)," said the financial services firm.

"Semiconductor shortages still remain the key bottleneck for JLR, which is in turn impacting profitability and cash flows," Motilal Oswal added.

Prabhudas Lilladher gave a buy call to Tata Motors with a target of Rs 510. It has fixed a stop loss of Rs 435. The market price stood at Rs 453 on September 14 when the recommendation was given.

"The stock after the short correction has bottomed out near Rs 440 levels and has witnessed a decent pullback to improve the bias with currently moving past the confluences of significant moving average like the 200 DMA and 50 EMA at  Rs 452 zone indicating a "Golden Cross" to strengthen the trend. With the RSI also showing a trend reversal to signal a buy has made the chart look attractive with ample upside potential move anticipated in the coming days. We suggest to buy and accumulate this stock for an upside target of  Rs 510 keeping the stop loss at Rs 435, " said Prabhudas Lilladher in a report.

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AR Ramachandran, Co-founder & Trainer, Tips2Trades

"Despite severe headwinds faced by the Eurozone due to very high inflation and poor growth performance, Tata Motors has so far held on to its support base of  Rs 440. Tata Motors needs to close above  Rs 463 on the daily charts for a strong uptrend up to  Rs 520. Investors can hold long-term buy positions with a stop loss of Rs 440."

Ravi Singh, vice president, head of research, Share India

"As per the company, JLR faces headwinds due to lockdowns in China for Covid-19, the global supply chain issues in its UK subsidiary caused by the war in Ukraine and difficult macroeconomic conditions. These problems may impact JLR financially in FY23. However, in India, company's vehicles across commercial vehicle and passenger vehicle segments including EVs remained robust, which positively impacted Tata Motors sales in the short term. The stock price may show some strength to touch the levels of Rs 500 till Diwali amid festive demand. The long-term outlook of the stock remains weak citing the JLR's sales which contributes a majority of chunk to Tata Motors revenue."

Published on: Sep 20, 2022, 11:29 AM IST
Posted by: Aseem Thapliyal, Sep 20, 2022, 11:20 AM IST