Buy Tata Motors; target of Rs 970: LKP Research

LKP Research's research report on Tata Motors

Global luxury car volumes declined 3% yoy in 9MCY24, led by (1) 14% yoy decline in the China volumes and (2) 1% yoy decline in volumes in Europe due to recessionary pressures in Germany and France, partly offset by a 1% yoy increase in volumes in North America. While most luxury OEMs revised their volume guidance downward primarily due to weakness in the luxury market in China; however, we expect a lagged recovery for luxury goods, including passenger cars in China over H1 CY25E due to interventions by the Chinese government and central bank. Similarly, Central Bank of Europe is also expected to cut rates in CY25E, thus resulting in raising the demand for luxury cars in the European continent. This is likely to stimulate the capex cycle and thereby improve the consumption cycle and consumer confidence. North American luxury car market demand has remained resilient despite the overall slowdown in consumption of luxury goods and the volumes grew 7% yoy in Q3CY24. Overall, luxury car market sales increased by 1% yoy in 9MCY24 as opposed to decline in sales in other developed markets. We expect the volume growth in luxury car market to sustain in the coming quarters.

Outlook

We revise our TP to ₹ 970. The stock is trading at 11.1x FY27E consolidated earnings estimates. The stock has corrected by approximately 40% from its 52 week highs. Considering our optimistic view on the stock, we now find it to be attractive from these levels. Hence it is a Value BUY! Slowdown in key global markets remains a monitorable.