On Thursday, Ambit Capital initiated coverage on Tata Motors Ltd. (NYSE:TTMT:IN) (NYSE:TTM) with a Buy rating and set a price target of INR 1,064. The brokerage firm highlighted Tata Motors' turnaround over the past two years and its focus on profitable growth across all business segments.
Tata Motors' luxury vehicle arm, Jaguar Land Rover (JLR), is aiming to transform into a broader luxury brand, extending the appeal of its iconic models. According to the analyst, a successful shift in JLR's strategy could lead to significant profit enhancements and subsequent upgrades in the company's valuation.
In the Indian market, the Passenger Vehicles (PV) segment is expected to perform strongly, outpacing the market by addressing portfolio gaps and capitalizing on the electric vehicle (EV) disruption. The Medium & Heavy Commercial Vehicles (M&HCV) segment remains margin-focused amidst demand uncertainties, while the Light Commercial Vehicles (LCV) segment is working to regain market share, partly through the introduction of EV products.
For the fiscal year ending March 2025, moderate growth is anticipated for both JLR and the Commercial Vehicles (CV) segments, with the India PV segment likely to benefit from new product launches. Potential rerating catalysts for Tata Motors include the possibility of separately listing its CV and PV businesses and the successful execution of JLR's strategy to pivot towards the luxury market.
Ambit Capital's valuation of Tata Motors is based on the sum of the parts (SOTP) as of June 26, which underpins their positive outlook and the INR 1,064 price target.
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