Brokerages cheer Tata Motors’ Q1 earnings

Brokerages cheer Tata Motors’ Q1 earnings

Mumbai: Shares in Tata Motors raced to their highest in at least two decades on Wednesday, as brokerages cheered its forecast-beating earnings, steered by strong demand for its Jaguar and Land Rover brands.

Edelweiss raised the stock to “buy" from “reduce," while Citi Investment Research raised its target price on the stock to Rs1,197 from Rs947 per share.

Bank of America-Merrill Lynch also raised its price objective on the stock to Rs1,100 from Rs924, while reiterating a “buy" rating.

The company’s Jaguar and Land Rover unit, which Tata bought from Ford Motor Co in 2008, is expected to fuel growth in coming quarters as demand for luxury brands increase, particularly in emerging economies.

The stock rose as much as 6.9% to Rs1,023.55, its highest in at least 20 years, data from Thomson Reuters showed.

At 2:37 p.m, it was trading 5.8% higher at Rs1,012.85 while the main stock index was down 0.3%, dragged lower by weak Asian markets.

Around 3.3 million shares were traded on the BSE, more than 4.5 times its average volume in the last 30 days.

“The stock is well-placed in terms of valuations. We are seeing earnings upgrades for the stock," said Sandip Sabharwal, CEO of portfolio management services at brokerage Prabhudas Lilladher.

Sabharwal currently holds Tata Motors for his clients.

The stock is up nearly 28% so far in this year, after gaining nearly five times in 2009. It has outperformed the 30-share BSE index which is up 4% so far this year, after rallying 81% in 2009.

Tata Motors is the country’s leading maker of trucks and buses with about two-thirds of the market.

The company, part of the Tata group spearheaded by Ratan Tata, also makes utility vehicles and launched the ultra-cheap Nano cars.

The 72-year old Ratan Tata, who often drives himself to work in a Tata Indigo sedan, is due to retire by the end of 2012 and a search for his successor has begun.

Of 26 analysts tracked by StarMine, 15 rate the stock a “strong buy", and 13 recommend a “buy." Six analysts have a hold on the stock while two rate it a sell.

But, not everyone was convinced it was a good time to invest in the stock.

“I am not saying it is priced for perfection, but all the good things are priced in," said Vikas Pershad, chief executive of Chicago-based Veda Investment. He added that he advises booking profits at current levels.