Shares of Tata Motors Ltd. concluded Monday's trading session down 3.02 percent, settling at Rs 384.04 on the NSE. The decline followed the company's revenue falling short of analyst expectations, primarily due to average selling prices being affected by the fulfillment of export orders.
Analyst Optimism Despite Revenue Miss
Despite the revenue miss and subsequent share price dip, market sentiment among analysts remains overwhelmingly positive. The stock has garnered at least 20 'Buy' recommendations with no 'Sell' calls, and the Bloomberg consensus target stands at Rs 510, indicating a potential upside of 32 percent.
Brokerage Insights and Future Outlook
- UBS reported that Tata Motors' EBITDA exceeded its estimates by 1 percent, with margins 20 basis points above expectations, even amid elevated commodity costs. The firm's management expressed optimism regarding demand outlook, anticipating high-single-digit to low-double-digit industry growth for the quarter. UBS raised its FY27 earnings estimate by 4 percent and FY28/29 estimates by 5 percent each, maintaining a 'Buy' rating with a revised target of Rs 645, favoring the commercial vehicle (CV) segment.
- Nuvama highlighted Tata Motors Commercial Vehicle (TMCV)'s aggressive expansion in the EV sector, broadening its product pipeline across various segments, including Ace and Intra in Small Commercial Vehicles (SCVs) and multiple truck models up to 55T. EV adoption is gaining traction, with SCV pickup penetration at 12 percent, projected to reach 20 percent by Q4FY27. Nuvama retained its 'Buy' rating with a target of Rs 480 per share.
- BofA Securities noted a positive recovery in the truck cycle, with Q2 volume growth strong at 43 percent year-over-year and demand momentum continuing into October. Fundamentals like fleet utilization and operator profitability remain robust. Exports are set for a significant jump in F27-28, driven by 70,000 LCV orders for Indonesia. BofA set a target of Rs 515.
- ICICI Securities confirmed that the IVECO acquisition is on track for completion by Q3. However, it reduced its EBITDA margin estimates for FY27-29 by 20-50 basis points due to surging cost inflation. The brokerage maintained an 'ADD' rating with a revised target of Rs 450.
While management anticipates commodity cost pressures to persist into Q3, the company has implemented price hikes to partially offset the impact. Overall, the underlying demand for commercial vehicles and the strategic push into electric vehicles continue to fuel strong analyst confidence in Tata Motors' long-term growth trajectory, despite short-term revenue fluctuations.