Tata Motors Shares Rebound After 3 Days As Brokerage Upgrades To 'Buy'

Tata Motors‘ share price jumped back into the green on Thursday after the company received an upgrade from a brokerage firm.

What Happened: The surge today comes as Emkay Global upgraded the stock’s rating from “add” to “buy” with a price target of ₹1,175, The target indicates an around 22% upside from the stock’s last closing price.

The analysts noted that Tata Motors’ stock has corrected by 16% from its peak, largely due to factors such as a downgrade in the outlook for BMW (driven by muted demand in China) and slowing performance in Tata’s domestic commercial vehicle and passenger vehicle segments, including rising discounts and price cuts.

The brokerage house highlighted that Jaguar Land Rover, China accounts for a smaller share of sales (~24%) compared to BMW (~32%). While BMW downgraded its outlook for 2024 due to supply chain issues and weak demand in China, Emkay highlights that JLR’s profitability and debt outlook remain stable.

JLR’s strength in the Chinese import market, supported by its premium brand position and growing EV penetration, is expected to sustain its business in the country despite the challenges.

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In the India commercial vehicle segment, Emkay sees improving prospects, with margins likely to rise due to healthy fleet operator profitability and disciplined pricing.

Recent demand for medium and heavy commercial vehicles (MHCV) has been soft, partly due to a high base in Q2FY24 (which saw an 18% year-on-year growth). However, a catch-up in government infrastructure spending is expected to revive demand in the latter half of FY24.

In the passenger vehicle segment, the market is showing signs of weakness, with slowing retail sales, rising inventories and increasing discounts. While Tata Motors may feel the impact of this overall sluggishness, the brokerage believes that new launches, such as the Tata Curvv, and lower inventory levels could help the company perform better than the industry average.

Earlier in the month, both JP Morgan and BofA Securities also shared a bullish outlook on the stock. JP Morgan reiterated its "overweight" rating on Tata Motors with a target price of ₹1250, while BofA had a “buy” call with a target of ₹1,280. On the other hand, UBS maintained a "sell" rating on Tata Motors due to concerns around Jaguar Land Rover.

Price Action: Tata Motors’ share price was up 1.35% to trade at ₹975 as the markets opened on Thursday.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.