Automotive giant Tata Motors Ltd shares gained on Tuesday, June 10, as brokerages roll out reviews of the carmaker's strategy for its commercial and passenger vehicle arms during its analyst meeting.
Tata Motors targets scaling up its double-digit EBITDA for the CV business into teens by FY26 and is aiming at a 10 percent EBITDA for PV and EV business by FY30, an investor presentation said on June 9.
The CV business will be 'stepping up the pace now', said Tata Motors, setting sight on 40% market share by 2027, with teen EBITDA margin. Commercial vehicles at Tata Motors could see a proactive investment in decarbonisation and connectivity solutions, along with software defined vehicles (SDVs).
The management reaffirmed its EV business achieved EBITDA breakeven in FY25 in a mark of improved profitability, which it said will continue going forward. The car maker is now targetting its EV business to have a penetration of 20% by FY27 and over 30% by FY30 with continued improvement in margins.
The EV side of the business is well-funded for the next three years, added Tata Motors, and said it is aiming at leading the transition towards software defined vehicles (SDV) in India. Tata Motors added that it plans to 'converge' its cost structure for EVs with ICE engine and deliver positive EBITDA.
On car sales, the management sees muted demand growth going forward, with the shift to SUVs continuing, amid a highly competitive environment. Tata Motors added that the uncertainty around the global trade environment may continue to induce added volatility into the business. Tata Motors said it will double-digit EBITDA margins and positive free cashflow in the passenger vehicle segment, going forward.
At 9.30 am, shares of the auto giant were quoting Rs 722.75 each, higher by 70 basis points on the NSE.
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Should you buy, sell, or hold shares of Tata Motors?
Brokerage: Motilal Oswal
Rating: Neutral
Target Price: Rs 690
Downside: -4%
Rationale: While it has set an ambitious target for both domestic CV and PV businesses, execution remains the key monitorable given the weak demand environment both in CVs and PVs and rising cost pressures. Given these headwinds, its target of improving both market share and margins seems challenging. The brokerage refrained from changing its estimates at this stage.
Brokerage: Nuvama Institutional Equities
Rating: Reduce
Target Price: Rs 670
Downside: -6.7%
Rationale: Nuvama reckons JLR sales shall moderate ahead, due to challenging demand conditions in the US and China markets. Also the brokerage sees a muted performance in the India CV division owing to reasonable utilisation levels with transporters, increasing competition from Railways and a high base. A muted demand outlook and increasing marketing/sales promotion spends would lead to a muted 3% EBITDA CAGR over FY25–27E.
Brokerage: Emkay Global
Rating: Buy
Target Price: Rs 800
Upside: 11.2%Rationale: Tata Motors' CV business is on a strong footing, on robust profitability-led growth amid a potential demand recovery in the CV cycle. PV business performance, though, will be muted amid a weak industry demand environment and lukewarm response to recent launches. The brokerage's estimates are unchanged.
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