Tata Motors share price jumps 4% after CLSA retains buy; Goldman Sachs flags long-term concern in PV biz

CLSA has a maintained its buy call on the stock and has raised target to Rs 400 per share and has also raised FY22-23 EPS estimates by 4 percent.

February 23, 2021 / 10:46 AM IST
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Tata Motors share price jumped over 4 percent in the morning session on February 23. The stock has risen over 85 percent in the last 3 months but has lost steam owing to a fall in revenue in its JLR business.

The auto major reported a 67 percent year-on-year (YoY) growth in consolidated profit at Rs 2,906.45 crore for the quarter ended December 2020 driven by robust volumes, improved product mix and cost-saving measures. Profit in the year-ago period was Rs 1,738.3 crore.

Tata Motors expects the domestic passenger vehicles industry to grow in double digits in 2021-22 on the back of continued robust demand momentum driven by a shift towards personal mobility in the aftermath of the COVID-19 pandemic, coupled with a low base effect, according to a top company official.

"There is a momentum which continues on the demand side because of the shift towards personal mobility. That will remain till everybody gets vaccinated. We don't know when everyone will get vaccinated," said Tata Motors President Passenger Vehicle Business Unit Shailesh Chandra.

Global research firm CLSA has maintained its buy call on the stock and has raised the target to Rs 400 per share. It has also raised FY22-23 EPS estimates by 4 percent driven by higher volume and better margin for India business, according to a CNBC-TV18 report.


However, UBS has a neutral call on the stock with a target of Rs 360 per share. The firm is of the view that India investor day highlights strong momentum adding that in commercial vehicles, the company targets a 10 percent+ EBITDA margin across the cycle.

UBS believes that the company's competitive position has improved with tighter emission norms and regulatory changes. India Car business' profitability improvement is likely to continue with market share gains.

Macquarie also has a neutral call on Tata Motors with a target of Rs 275 per share.

Research firm Goldman Sachs has retained its sell call on the stock with a target of Rs 175 per share. It is of the view that the India turnaround is priced in adding that at current market price, implied EV/EBITDA (FY23E) for India business is around 15x.

"There are long-term concerns on sustainability of market share gains in passenger vehicle business adding that implied JLR valuation multiple at current market price is higher than for German premium manufacturers.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sandip Das
first published: Feb 23, 2021 10:31 am

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