Gautam Chhaochharia of UBS India advised selling Tata Motors as the risk-reward is clearly unfavourable.
Chhaochharia told CNBC-TV18, “We still have a sell on Tata Motors. All the new models in Jaguar Land Rover (JLR) are doing well, the margins are sustaining and there is a quick recovery in the local commercial vehicle (CV) cycle.”
“I think both of these seem unlikely or the best case scenario to us while a more reasonable case scenario will be slightly below what the Street is factoring in. The stock is trading at a premium to where Audi and BMW are trading at. One can argue that Tata Motors had higher growth, but on the other hand there is less visibility in terms of free cash flows due to capex cycle which the company has laid out for JLR. Considering these, the valuation premium seems at best unjustified. So at this price the risk-reward is clearly unfavourable in our view,” Chhaochharia added.