Tata Motors' Target Price Raised By CLSA On Robust JLR Volume Growth
CLSA is positive on the automakers outlook and JLR's future in electric vehicles.
Tata Motors Ltd.'s target price was raised by CLSA while maintaining a 'buy' rating, citing robust volume growth and improving margin outlook.
The target price was raised to Rs 841 apiece on the company from Rs 803 per share earlier.
In October, Jaguar Land Rover saw a 14.1% year-on-year increase in retail volumes. This surge was primarily fueled by higher volumes in Europe (up 29%), the U.K. (up 65%), and China (up 6.8%). However, North American volumes declined by 13.3% compared to the previous year.
CLSA maintains a positive outlook, expecting JLR's volume to continue improving due to robust demand and a substantial order book. The brokerage anticipates a more than 24% year-on-year growth in wholesale volumes (excluding China JV) to reach 3.98 lakh in fiscal 2024.
The cost of incentives per vehicle, for both Jaguar and Land Rover, has notably risen over the last four months, the brokerage said in a note.
In June 2023, Jaguar's incentive cost per vehicle was $619, and Land Rover's was $378. But by October 2023, these figures had surged to $2,569 and $1,680, respectively, CLSA noted.
Although JLR's U.S. inventory has stabilised, CLSA estimates the company to report an Ebit margin exceeding 7%, thanks to a better product mix and lower commodity expenses.
Tata Motors has raised JLR's earnings before interest and taxes margin projection to 8% for FY24, from the initial 6%, aiming for a 10% margin by FY26.
CLSA anticipates the Ebit margin to stay in the range of 7-8% for both FY24 and FY25, aligning with recent upgrades by Moody’s and S&P Global for the car maker.
Moody’s expects JLR's adjusted-Ebita margin to climb past 8% in fiscal 2024, while S&P Global sees it surpassing 10% for the same period.
Shares of Tata Motors were trading 0.11% higher to Rs 682.45 apiece, compared to a 0.07% advance in the benchmark NSE Nifty 50 at 11:30 a.m.
Of the 35 analysts tracking the company, 28 maintain a 'buy', three recommend a 'hold,' and four suggest a 'sell', according to Bloomberg data. The average 12-month consensus price target implies an upside of 8.2%.
