BackBrokerages see upside of over 15% upside Tata Motors stock price, should you buy or sell?
Brokerages give Tata Motors an upside of more than 15% as it targets strong double-digit EBITDA margins and positive FCF generation for its CV and PV businesses, and positive EBITDA margins for EVs.
PremiumBrokerages remain upbeat about automobile major Tata Motors and they have given an upside of more than 15 per cent in .
For the CV business, Tata Motors targets strong double-digit EBITDA margin, annual capex of ₹25 billion, and strong FCF generation. While for PV business, it expects double-digit EBITDA margin, annual capex of Rs30 billion, and positive FCF generation.
For EVs, it aims to achieve positive EBITDA margin, cumulative capex of $2 billion until FY27 for product development and architectures, and breakeven FCF.
What should investors do?
Motilal Oswal Securities said Tata Motors should witness a healthy recovery as supply-side issues ease for JLR and commodity headwinds stabilise for the India business.
Tata Motors, it said, will benefit from the CV upcycle and stable growth in PVs, b) company-specific volume/margin drivers, and a sharp improvement in FCF, as well as a reduction in net debt in both JLR and the India business.
The stock trades at 19.2 times FY24 and 16.7 times FY25 consolidate PE and 4.9 times FY24 EV/Ebitda and 4.2 times FY25 EV/Ebitda. Motilal Oswal has a target of ₹650 on the stock.
Tata Motor’s stock price has grown 12.7% over the past five years ( ₹310 levels in June 2018), outperforming the broader Nifty Auto index, said ICICI Securities
“We maintain BUY on the stock tracking profitability at the helm in domestic CV & PV business (including EVs), JLR's progressive volume recovery on the anvil, reiterated commitment towards EVs & healthy FCF generation," it said in its report. Retaining our financial estimates & marginally tweaking our valuations, we now value TML at ₹725 on SOTP basis (10x, 2x FY25E EV/EBITDA on India, JLR; ₹126 value to Indian EV business; earlier TP ₹650)," it said.
ICICI Securities said that Tata Motor's intent to go auto net debt free by FY25 though healthy CFO generation and sale of non-core assets (including stake sale in Tata Tech), while JLR guiding for FCF generation of £2 billion & net debt reduction to <£1 billion by FY24E, would be major triggers for stock movement.
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