Tata Motors Share Price Surge as Brokerages Affirm Bullish Outlook on Growth Prospects

Tata Motors share price increased by almost 2.3%, reaching ₹1,010 in early trading on June 12, marking the fifth consecutive session of gains. Brokerages remain optimistic about the stock, driven by the promising growth prospects the company presented during its investor meeting. On June 11, the prominent electric vehicle manufacturer announced investment plans of ₹16,000-18,000 crore for its EV division through FY30.

Jefferies has recommended buying Tata Motors share price, with a target price of ₹1,250 per share. The firm emphasizes the company's dedication to enhancing its brand and boosting profitability in both its passenger vehicles (PVs) and commercial vehicles (CVs) segments. Tata Motors plans to raise its market share in PVs to 16% by FY27 and further to 18-20% by FY30.

Furthermore, Tata Motors aims to achieve a double-digit EBITDA margin in its commercial vehicles (CV) and passenger vehicles (PV) internal combustion engine segments, and it targets breaking even in its electric vehicle (EV) segment by FY26.

The management also expressed confidence in achieving financial stability by becoming net debt-free by the fiscal year 2025. Additionally, the maker of the Nexon has set a target of securing a market share of over 25% across various segments.

Morgan Stanley has given Tata Motors an equal-weight rating with a target price of ₹1,100 per share. According to the analysts, the company's individual business units have become self-sustaining, making demergers the next logical step to further enhance the business. They also noted that the supportive macroeconomic environment is likely to prolong the commercial vehicle (CV) business cycle.

The internal combustion engine (ICE) segment is forecasted to produce positive and increasing free cash flow (FCF), whereas the electric vehicle (EV) segment is anticipated to reach neutral FCF in the medium term. IncCred Equities believes that Tata Motors' commercial vehicle (CV) division has achieved a remarkable return on capital employed (RoCE) of 36% in a year with stagnant volume growth.

Although the demerger process might take a year to finalize, Incred favors the CV business after the demerger. The gradual recovery in Tata Motors' India passenger vehicle (PV) business and the performance of Jaguar Land Rover (JLR) has resulted in a downgraded rating.

The enhanced growth prospects in the commercial vehicle (CV) segment have led Emkay Global Financial Services to increase its target multiple to 12.5x. Consequently, the brokerage firm has upgraded its rating on Tata Motors shares to ‘Add’ from the previous ‘Reduce’ and raised the share price target to ₹1,050 from the earlier ₹950.

“Even in India business, both CV and PV businesses are seeing moderation in demand. We have factored in flat margins for India business over our forecast period. While there is no doubt that Tata Motors delivered an extremely robust performance across its key segments in FY24, the above-mentioned headwinds could hurt its performance going ahead," Motilal Oswal said.
Tata Motors aims to grow at twice the rate of the underlying passenger vehicle (PV) industry through new models in internal combustion engine (ICE), compressed natural gas (CNG), and electric vehicles (EVs). The company plans to expand its addressable market to 80% by FY30, up from the current 53%, with EVs expected to constitute 30% of its portfolio by FY30. Tata Motors is targeting profitability improvements, aiming for a double-digit margin in its combined PV and EV business by FY30. Additionally, the company plans for its EV segment to achieve EBITDA break-even by FY26.