Tata Motors extends gain, up 2% as BofA, JPMorgan retain bullishness

Tata Motors share price has tanked 5 percent in the past week.

Shares of Tata Motors Ltd rose by over 2 percent to Rs 1,006 on September 13, extending gains for a second session in a row after Bank of America (BofA) and JPMorgan reaffirmed their bullish stance on the counter despite recent concerns surrounding the company. To be sure, the counter gets a much-needed breather after tanking for nine trading sessions in a row.

The two have identical price targets with BofA giving a target of Rs 1,280 while JPMorgan estimates the price to Rs 1,250. The implied upside is about 30 percent from the current market levels.

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JPMorgan says that despite profit warnings from peers, the underlying trends remain stable. It notes that while Indian market trends may be volatile in the near term, the stock’s performance will largely depend on Jaguar Land Rover (JLR). Although there are concerns regarding China, these are being offset by strong performance in the US and UK, along with consistent improvement in the product mix. Analysts expect the stock to re-rate over the medium term as the company’s balance sheet strengthens and EPS volatility decreases.

Meanwhile,  BofA sees a favourable risk-reward scenario for the stock over a one-year view, with an upside potential of approximately 30 percent. The firm remains optimistic about the commercial vehicle (CV) cycle and model action in the passenger vehicle (PV) segment. It also expects JLR to benefit from a positive mix and average selling price (ASP) trends. Additionally, the balance sheet deleveraging and corporate restructuring, including the demerger, are well underway.

The recent rout in the stock came after UBS retained its 'sell' call on Tata Motors, citing further downside risk from margin slippage at the company's luxury arm Jaguar Land Rover and within the domestic passenger vehicles segment. The brokerage remains cautious as it believes the extended successful run of JLR's premium models--Defender, Range Rover and Range Rover Sport have started to moderate.

At noon, shares of the company were trading at Rs 995, higher by a percent from the previous close on the NSE. Tata Motors share price has tanked 5 percent in the past week.

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