Reduce Tata Motors; target of Rs 901: ICICI Securities

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ICICI Securities research report on Tata Motors

Tata Motors (TTMT) approved proposal of demerger of existing listed entity into two listed entities, one w.r.t CVs plus related investments and the other including JLR, India PVs/EVs. With identical shareholding post demerger, we believe this development would help investors manage their holdings in the CV business, as per their assessment of CV cycle’s trends. This demerger, in our view, would bring to the fore the synergistic benefits within the PV domain more efficiently and help TTMT unlock further value in domestic PVs vs. valuing India CV+PVs at 10-12x EV/EBITDA – India PVs shall be valued at 15x EV/EBITDA, 10% discount to MSIL, pushing up overall valuation by ~6%.

Outlook

We downgrade TTMT to REDUCE from Hold, post its ~40% rally in past three months, with an SoTP-based TP of INR 901 (implying ~13x/2.5x FY26E India/JLR EV/EBITDA).

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