Tata Motors’s shares escalated to a fresh seven-year high of ₹ 585.90 apiece on the bourses after gaining 40 percent in just three months! Its shares were trading at ₹ 412 three months ago and surged to the current level, making the scrip one of the best performers on the Nifty 50 index.
The automaker’s shares recovered from their lows amid a slew of positive developments and growth prospects. Tata Motors has become the second largest in terms of sales outlets with 1,410 showrooms across the country, up from 862 in FY20. It now has 855 service centres, up from 653 three years ago.
Analysts at Jefferies said that the British division of the corporation, Jaguar Land Rover (JLR), has successfully decreased its break-even production levels by 50 percent for the fiscal year 2023. In a strategic move, the company plans to cease vehicle assembly at the Castle Bromwich plant, which is expected to enhance its utilisation levels.
JLR witnessed a significant turnaround in operational and financial performance as supply issues of chips have started to ease, according to the brokerage.
The Indian division of Tata Motors benefits from a positive demand cycle and improvements in its passenger vehicle (PV) franchise. The company focuses on SUVs and attractive product styling and shows promise in the Indian PV market.
Jefferies has a ‘buy’ rating on the company’s shares with a target price of ₹ 700.00, which translates to an upside of 21 percent as compared to the company’s share price of ₹ 578.55 apiece.
Similarly, ICICI Securities has a ‘buy’ rating on the automaker’s shares with a target price of ₹ 700.00, which translates to an upside of 21 percent as compared to the company’s current share price.
The brokerage believes that the company’s future price performance depends on the intent to go auto net debt free by FY25 through healthy CFO generation and the sale of non-core assets (including a stake sale in Tata Technologies). A few other factors to watch out for are JLR guiding for free cash flow generation of £2 billion & net debt reduction to less than £1 billion by FY24E.
With a market capitalization of ₹ 2,09,790 crores, Tata Motors is a large-cap company. It has a low return on equity of 5.37 percent. The company’s shares were trading at a price-to-earnings ratio (P/E) of 39.51, which is substantially higher than the industry P/E of ₹ 18.81, indicating that the stock might be overvalued as compared to its peers.
Written By Simran Bafna
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