Global brokerage firm CLSA has upgraded Tata Motors to a high-conviction ‘Outperform’ rating from its previous ‘Outperform’ stance, setting a revised target price of ₹930. The brokerage sees a compelling valuation opportunity despite short-term headwinds, making Tata Motors an attractive bet for investors.
Key Takeaways from CLSA’s Report
1. Valuation Advantage Amid Near-Term Challenges:CLSA highlights that Tata Motors' stock presents an opportunity for investors to enter at a favorable valuation, given the current near-term outlook
2. JLR Trading at Discounted Valuation:Jaguar Land Rover (JLR), a subsidiary of Tata Motors, is currently trading at 1.2x FY27CL EV/EBITDA, which is significantly lower than its normative multiple of 2.5x. This suggests that JLR remains undervalued relative to its historical benchmarks.
3. Sum-of-the-Parts Valuation Shows Upside Potential:At the current stock price, the implied per-share value of JLR is ₹320, whereas CLSA’s target valuation for JLR in a sum-of-the-parts approach is ₹450 per share. This indicates a potential upside in JLR’s valuation, which could contribute to Tata Motors’ stock growth.
4. Cushion Against External Risks:The brokerage notes that the current valuation provides sufficient cushion against macroeconomic risks, such as the US tariff hike and weaker-than-expected demand and margin pressure.
5. Revival in Commercial Vehicle Segment Expected:Tata Motors’ commercial vehicle business has faced subdued demand in the past couple of years, especially in the medium and heavy commercial vehicle segments. However, CLSA believes a cyclical revival from FY27 will start reflecting in Tata Motors' stock price over the coming quarters
With the combination of undervaluation, strong fundamentals, and the expected cyclical recovery in commercial vehicles, Tata Motors appears to be well-positioned for long-term growth. Investors looking for an entry point may find the current price levels attractive, considering CLSA’s optimistic outlook and target price of ₹930.
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