Motilal Oswal sees 13% upside in Tata Motors stock: 5 reasons why

economictimes.indiatimes.com:

Tata Motors can rally another 13%, with the stock expected to scale target of Rs 700, riding on strong growth drivers. Motilal Oswal has recommended a 'Buy' rating on Tata Motors, estimating a healthy recovery as supply-side issues ease and commodity headwinds stabilise for its India business. India's largest EV play is expected to benefit from the commercial vehicle (CV) upcycle and stable growth in its passenger vehicles segment, Motilal Oswal said in a note.

The carmaker has company-specific volume and margin drivers and a sharp improvement in FCF (free cash flows) and leverage in both JLR and its India business is expected to hold Tata Motors in good stead, the brokerage added. The domestic brokerage values Tata Motors stock at 19.3X/16.2X FY24E/FY25E consolidated P/E and 5X/4.2X EV/EBITDA. The shares are currently hovering at all-time high levels.

It hit 52-week high of Rs 634.60 on BSE on Monday. The stock has been in top form, giving returns of over 42% in the last 12 months. It has outperformed both Nifty50 and Nifty Auto which have risen 20% and 28% returns, respectively during this period.5 triggers for Tata Motors: 1) Motilal Oswal estimates a double-digit margin by FY26 and expects the company to become net cash positive by FY25.

2) JLR’s FY23 annual report highlights that its strategy for transitioning to a modern luxury vision, centered around electric vehicles, is driven by three platforms viz. — (a) Electrified Modular Architecture (EMA) – EV only platform, b) flexible Modular Longitudinal Architecture (MLA) platform, offering flexibility between ICE, hybrid, and pure-electric, and c) JEA for all electric Jaguars. 3) Company is reinforcing and upskilling its human capital.