On Thursday, Tata Motors (NYSE:TTM) Ltd. (TTMT:IN) (NYSE: TTM) stock received an upgrade in its stock rating from Neutral to Buy by a Nomura/Instinet analyst. Accompanying the upgrade, the price target for the company's shares was increased to INR1,294.00, up from the previous target of INR1,141.00. The analyst cited a strategic shift at Tata Motors' luxury vehicle division, Jaguar Land Rover (JLR), as a key driver for the improved outlook.
The firm's analysis suggests that JLR's move from the premium segment to the luxury market positions it advantageously above highly competitive segments. This strategy appears to be effective, as evidenced by controlled incentives for Land Rover models, contrasting with rising trends among other original equipment manufacturers (OEMs). Despite projecting modest volume growth for JLR, with estimates of 402k, 405k, and 435k units over fiscal years 2025 to 2027, the analyst expects stronger earnings growth.
The anticipated earnings boost is attributed to increased average selling prices (ASPs) and profit margins. JLR's ASP is forecasted to climb from approximately £72,000 in fiscal year 2024 to £77,000 by fiscal year 2027. Furthermore, the firm projects that JLR's EBIT (earnings before interest and taxes) margins could expand from an earlier estimate of 7.8% to 8.5% in fiscal year 2025 and potentially reach 10.1% by fiscal year 2027. The analyst also suggests that margins could further increase to about 11-12% by fiscal year 2030.
The report highlights several factors that may contribute to JLR's margin improvement, including the phasing out of Jaguar's internal combustion engine (ICE) models, the success of new Jaguar electric vehicles (EVs) on the JEA platform, and the introduction of more premium Range Rover variants. The company's long-term guidance indicates EBIT margins around 15%, which the analyst believes will hinge on the success of Jaguar's EVs. Notably, Jaguar Racing's performance in Formula E is seen as a positive indicator of JLR's electric vehicle competencies.
In other recent news, Tata Motors has been the subject of numerous financial firm analyses. Goldman Sachs has maintained a Neutral rating for the company, following the automaker's Investor Day presentations. Tata Motors shared medium-term targets for various segments, including domestic passenger vehicles, electric vehicles, and commercial vehicles, and provided updates on its progress towards local lithium-ion cell manufacturing. The company also disclosed its ambition for the EV business to reach EBITDA breakeven by the fiscal year 2026.
In addition, Tata Motors is progressing with a demerger process expected to conclude within the next 12 months. This move aligns with the company's plans to commence in-house manufacturing of lithium-ion cells by 2026.
Jefferies and JPMorgan have reaffirmed their 'Buy' and 'Overweight' ratings, respectively, on Tata Motors, reflecting confidence in the company's strategic initiatives and potential for growth. These include plans to increase market share in passenger and commercial vehicles.
Lastly, CLSA has maintained an 'Outperform' rating for Tata Motors, highlighting the company's potential for growth and operational improvement through strategic initiatives. These recent developments provide insight into Tata Motors' current strategies and future plans.
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