Tata Motors shares hit new 52-week high, up 4

Tata Motors shares hit new 52-week high, up 4.1%; should you buy, sell, or hold?

Auto major Tata Motors share price touched a fresh 52-week high at Rs 537.15 on Monday amid positive earning results for the quarter ended March 2023. The share price gained 4.1% from Friday’s closing price of Rs 515.95. Tata Motors’ Q4FY23 net profit came in at Rs 5,407.8 crore, compared to a net loss of Rs 1,032.8 crore in the corresponding quarter in the year-ago period. Additionally, the auto player’s profit after tax (PAT) grew 83% on a sequential basis.Tata Motors: Buy, Sell or Hold?Motilal Oswal: BUY

“Tata Motors’ Q4FY23 result was a strong beat across businesses resulting in consol. PAT of Rs 56 billion (v/s estimates of Rs 27 billion). Consolidated net debt (auto) reduced Rs 138 billion QoQ to Rs 437 billion. India businesses are focused on margin expansions as volume growth is likely to moderate in FY24. JLR wholesales are likely to be ~400k units in FY24 with 1HFY24 wholesales run rate to be similar to 4Q level of ~95k/qtr. As production improves, it expects ~5,000 units/month reduction in the current order book of 200k units in 1HFY24. We upgrade our consolidated. EPS by 13%/6% for FY24E/25E to factor in: a) JLR’s volume ramp up as well as moderation in certain costs, and b) margin improvements in India businesses. We recommend ‘BUY’ with a target price of Rs 590 per share.”

We maintain our positive stance given (1) JLR’s volume ramp-up resulting in strong revenue, profitability and FCF (aided by high order book), 2) CV segment (on domestic side) benefitting from ongoing upcycle, operating leverage and tailwinds from lower commodity costs & lower discounting and (3) strong market share in PV segment (13.5% vs 8% in FY21) led by revamped portfolio, rising SUV share and rising EV penetration. We expect revenue/EBITDA CAGR of 12%/32% over FY24/25E. Retain ‘BUY’ with SoTP based TP of Rs 605 (Mar-25) (previous Rs. 590).

Elara Securities: BUY

We are positively surprised by JLR’s aggressive net debt reduction target of GBP 2 billion in FY24 despite capex of GBP 3 billion. This may be achieved by higher EBITDA margin of ~14% (our est ~13% earlier) and working capital release of ~GBP 1.4 billion (not factored in earlier). Expect JLR’s EBIT margin at 6.5%/7% in FY24E/25E. India business may benefit from CV cyclical recovery (expect FY19 peak to be reached in FY24; 10%+ margin in FY24E/25E) and PV segment from improving EV penetration/margin. Maintain ‘Buy’ with raised SoTP TP to Rs 615 from Rs 521, as we roll forward to Jun-25E.