Automobile giant Tata Motors' shares continued their downward spiral, falling over five percent in trade on April 4, after Hong Kong-based brokerage CLSA downgraded its rating on the stock. Further, the pressures from Trump's tariffs will impact key subsidiary Jaguar Land Rover.
CLSA cut its rating on Tata Motors shares to 'outperform', down from 'high-conviction outperform' earlier. The target price on Tata Group player was cut to Rs 765 per share, down from Rs 930 apiece earlier.
The downgrade comes amid concerns over potential 25 percent U.S. tariffs on all auto imports, which could lead to a 14 percent year-on-year drop in JLR volumes by FY26.
Tata Motors is expected to see a significant hit from the tariffs, as subsidiary Jaguar Land Rover (JLR) has deep exposure to the American market. JLR sold over 4 lakh units globally in FY24, of which about 23 percent were sold in US alone.
CLSA expects JLR’s EBIT margin to fall to 7 percent in FY26/27, down from 9 percent in FY25. While JLR’s FY26 EBITDA estimate has been cut by 15 percent, free cash flow is expected to remain positive.
At close, Tata Motors shares were at Rs 615.3, lower by 5.9 percent on the BSE compared to the previous session.
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On the commercial vehicles front, CLSA sees the cycle bottoming out in FY26, with potential upside as it rolls CV valuations forward to FY28, adding Rs 127 per share in value. This provides some cushion against the risk to U.S. demand from the proposed tariffs.
"The US alone contributed over a fifth of JLR's total revenue last year, making it a crucial market. With limited options to maintain margins and meet prior guidance, JLR will likely resort to price hikes and cost efficiencies. However, these strategies won’t yield immediate results, and a near-term hit to both revenue and profitability is expected," said Nirav Karkera, Head of Research at Fisdom.
Tata Motors shares have been under pressure over the past year, eroding 40 percent in value. In comparison, the Nifty 50 index has gained around 2 percent during the same time period.
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