Where does Tata Motors stand in comparison to global carmakers?

Tata Motors announces demerger plan, to create two listed companies

Tata Motors shares have risen nearly 2.5x so far in FY24, but that has done nothing to dampen the bullish mood of analysts. Currently, the stock has 26 buys, five holds, and three sell calls, according to Bloomberg.

The company today plans to split into two listed entities: commercial vehicles (CV) and passenger vehicles (PV).  The development is a positive for the stock, but given the already rich valuations, the street is wondering how much more can it gain from these levels.

The stock trades at 157 times its trailing 12-month PE, more expensive than global peers. Tesla is at 77 times, Toyota at 11, and Mercedes at 5.5. Ferrari is at 57, Volkswagen at 5.12, Honda at 9.48, Ford at 6.18, and General Motors at 5.76. Among local peers across vehicle categories, Maruti Suzuki is at 42.66, Mahindra & Mahindra at 20.8, and Bajaj Auto at 38.62.

Tata Motor's consolidated earnings exceeded analyst estimates in Q3, as the company benefitted from new product launches and high demand, and also the easing of semiconductor chip shortages. New models like the Defender, Evoque, and Discovery Sport were well-received, boosting volumes and enhancing the order book.  The company also managed to trim debt by Rs 9500 crore in Q3 as it aims to become a zero-debt company.

Domestically, management is optimistic about sustained demand, driven by macroeconomic recovery and infrastructure development focus. The government's emphasis on sectors like cement, steel, and minerals is expected to contribute to CV demand recovery, targeting single-digit volume growth in FY24.

With a robust demand outlook, the management had reiterated its commitment to increasing investments in products and business models, aiming for double-digit EBITDA in both passenger vehicle and commercial vehicle segments and maintaining positive free cash flow in the coming years.

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