Shares of Tata Motors Ltd soared by 6.16 percent on the BSE, reaching a high of Rs 485 following the announcement of its June quarter results. The performance significantly exceeded analyst expectations, leading to widespread positive revisions from numerous brokerages.
Analysts Bullish on Commercial Vehicle Segment
The company's June quarter EBITDA for its commercial vehicle (CV) business came in stronger than anticipated, driven by robust performance across multiple segments. Analysts are projecting further margin improvements, partly due to recent price hikes implemented by the automaker.
Several prominent brokerages, including UBS, HSBC, Nomura, Investec, Kotak Securities, and IIFL, have reiterated or initiated 'Buy' recommendations for Tata Motors stock. Emkay Global has set the highest price target at Rs 700, while MOFSL, based on 18 brokerage targets, holds the lowest at Rs 434.
Nomura Upgrades, Citing Brighter Outlook
Nomura specifically upgraded Tata Motors to a 'Buy' rating, establishing a new target of Rs 554. The brokerage highlighted a 'brighter' outlook for the commercial vehicle segment, anticipating healthy double-digit growth in the ongoing July-September quarter for medium and heavy commercial vehicles (MHCV).
Tata Motors' commercial vehicle division (TMCV) has demonstrated strong market share gains in both heavy commercial vehicles and buses, with approximately 4,500 bus orders currently in hand. Analysts believe that a 2.5 percent price hike taken in July will contribute to improved margins going forward, offsetting continued commodity inflation.
Strong Q1 Volumes and Future Growth Projections
Despite a 3.5 percent sequential dip in the average selling price—primarily due to a lower mix of MHCV trucks (36 percent versus 44 percent in Q4)—Tata Motors reported a 26 percent year-on-year volume growth in Q1. This contributed to an overall revenue growth of 23 percent year-on-year.
Management remains optimistic about the demand landscape, noting healthy July growth and projecting double-digit growth for Q2. This positive outlook is supported by robust freight activity and an increase in e-way bills. While electric commercial vehicle (E-CV) momentum remains strong, battery cell availability has been identified as a key constraint.
Other analyst firms also adjusted their targets: Nuvama revised its target to Rs 525, citing increasing EV adoption and growing customer interest in trucks. Elara raised its Sum-of-the-Parts (SOTP) target price to Rs 508, attributing it to a better volume outlook and sustained market share gains.