Tata Motors Stock Surges for Third Consecutive Session
Shares of Tata Motors Limited, the automotive powerhouse, continued their upward trend for the third consecutive trading session on Friday, December 27, 2024. The stock climbed 3.50% during intra-day trading to hit a high of ₹766.75 per share. While it later pared gains to trade at ₹755.70, up 2.01% by 1:15 PM, the momentum reflects renewed investor confidence in the company.
This recent rally has pushed Tata Motors’ stock up by 6.12% over the past three sessions, outperforming the broader market, as the BSE Sensex gained a modest 0.48% to 78,852.90 levels during the same period.
Brokerages Signal a Bright Future for Tata Motors
Driving the bullish sentiment was domestic brokerage DAM Capital’s upgrade of Tata Motors from ‘Neutral’ to ‘Buy’, citing an attractive risk-reward ratio. The firm retained its target price of ₹870, indicating a potential upside of 17.4% from the previous closing price of ₹740.80. DAM Capital’s optimism is underpinned by expectations of a recovery in the automotive sector by FY26, aided by favorable macroeconomic conditions.
Meanwhile, other brokerages echoed similar confidence in Tata Motors’ long-term prospects:
- ICICI Securities highlighted a positive outlook for 2025, with new electric vehicle (EV) launches expected to drive growth. The stock’s 30% correction from its peak offers an appealing entry point for long-term investors.
- LKP Research pointed to significant strides made by Jaguar Land Rover (JLR), reductions in automotive debt, and new domestic bus orders as key catalysts.
- Emkay maintained an ‘Add’ rating with a bullish target price of ₹1,000, reflecting confidence in Tata Motors’ ability to navigate short-term challenges and capitalize on emerging opportunities.
Jaguar Land Rover: A Strategic Asset
Tata Motors’ luxury car division, Jaguar Land Rover (JLR), remains a central focus for investors. In the last quarter, JLR posted an EBITDA margin of 11.7%, despite a 350 basis point dip caused by higher marketing expenses and negative operating leverage.
Management expects a substantial recovery in the second half of FY25 as supply constraints ease and strategic cost management initiatives take effect. Strong free cash flow generation is set to support JLR’s ambitious electrification goals, with the company targeting net cash status by FY25.
Domestic Operations Drive Resilience
In India, Tata Motors’ commercial vehicle (CV) and passenger vehicle (PV) segments continue to show resilience. The PV division, bolstered by robust festive season sales, is expected to maintain its momentum with recent and upcoming launches. Meanwhile, CV demand is projected to rebound in the latter half of FY25, fueled by government infrastructure spending and an improving economic outlook.
EV Growth and Long-Term Valuation
The company’s commitment to electric mobility has drawn significant attention from analysts. Tata Motors is positioned as a leader in India’s fast-growing EV market, with new product launches anticipated to strengthen its market share.
From a valuation perspective, analysts view Tata Motors as a compelling investment opportunity. At just 11.1x FY27 consolidated earnings estimates, the stock offers attractive upside potential, particularly given its approximately 40% correction from its 52-week high.
Challenges Ahead
While the outlook is optimistic, analysts caution against potential headwinds, including subdued luxury car demand in China and Europe, and lingering inventory challenges in the domestic PV and CV segments. Strategic management of these challenges will be critical to realizing Tata Motors’ growth potential.
As the automotive giant powers forward with a robust recovery plan, a diversified product portfolio, and a strong focus on innovation, Tata Motors continues to capture the interest of investors and market watchers alike.
