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Tata Motors shares rally continued in Monday's trading session as the auto stock was trading over 9% higher at 417 per share on the BSE. The Tata group subsidiary's scrip has rallied around 21% in the past five sessions, whereas in a month, it has risen about 39%. 

However, Tata Motors' stock price has underperformed Nifty Auto index in past five years, having de-grown at around 9% CAGR (around 555 in October 2016). ICICI Securities' Buy recommendation comes on continued EV (electric vehicle) proactiveness. Its domestic EV sales were higher than 1,000 units for second successive month in September 2021 driven by Nexon EV.

The brokerage firm has retained its forward estimates, and now values Tata Motors at a revised target price of 450 on SOTP basis. “We revise upwards our target multiples for India business amid continued outperformance at Tata Motors India and is in line with its peers," ICICI Securities said in a recent note.

It expects the auto major to post a healthy 20.9% revenue CAGR over FY21-23E backed by 17% volume CAGR. Cost control, efficiency improvement-led FCF generation targets for ongoing deleveraging push (FY21 net automotive debt at ~| 41,000 crore) could act as key triggers for future price performance, the brokerage added.

Tata Motors is an auto original equipment manufacturer (OEM) from the house of Tatas, operating in domestic (PV, CV) as well as global markets (Jaguar Land Rover i.e. JLR). JLR is a luxury car brand, which includes two prominent names i.e. Jaguar (models like I-pace, etc.) & Land Rover (models like Defender, Evoque, etc.

Apart from Tata Motors, in its OEM coverage, ICICI Securities said it also likes Mahindra & Mahindra (M&M) on focus on prudent capital allocation, UV differentiation & EV proactiveness. It has a Buy rating on M&M with a target price of 1,000 per share.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.


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