Tata Motors‘ share price has taken a beating at the bourses during the quarter, but analysts at Sharekhan remain strongly bullish on the auto giant. The stock has gone down around 9% in the past three months.

The Tata Motors Analyst: Sharekhan analysts maintained the “buy” rating on the stock with a target price of ₹1,319. The target indicates an around 40% upside from the stock’s last closing price of around ₹930.

The Tata Motors Thesis: The analysts shared several factors that provide them confidence in the company’s future outlook. First, they said the production challenges faced by Jaguar Land Rover (JLR) in Q2FY2024 were well-communicated in advance, so the subdued volume performance during the quarter did not come as a surprise.

JLR’s wholesale volumes (excluding the China joint venture) dropped by 10% year-on-year, primarily due to supply disruptions related to high-grade aluminium. Despite these setbacks, JLR management expects a strong recovery in production and wholesale volumes during the second half of FY2025.

Secondly, the analysts also emphasise that BMW's recent cut to its EBIT margin guidance is company-specific and should not be seen as reflective of the broader luxury car market. BMW reduced its margin outlook for the calendar year 2024 from 8%-10% to 6%-7% due to high warranty liabilities from issues with its integrated braking system (IBS) and weak demand in China.

See Also: Mutual Funds Pick Up RVNL, Mazdock, IREDA Shares In Q2, Dump Yes Bank, CDSL

However, these challenges are unique to BMW, and the analysts believe they do not apply to JLR or other luxury car manufacturers. JLR remains optimistic, having guided for an 8.5% EBIT margin for FY2025, factoring in a moderation of global demand.

In the domestic market, Tata Motors' commercial vehicle and passenger vehicle segments clocked a drop in volumes during the first half of FY2025, with the commercial vehicle business seeing a 7.6% decline and the passenger vehicle business logging a 3.7% decline.

Despite this, management expects the commercial vehicle segment to recover in the December quarter, helped by the festive season and an anticipated increase in infrastructure spending. The passenger vehicle business is controlling inventories to manage wholesales effectively, reflecting a strategic approach to balance market demand, the research firm said.

The brokerage remains optimistic about the full year, anticipating that improvements in JLR's production and stronger performance in the domestic businesses will lead to better results in the second half of FY2025.

Price Action: Tata Motors’ share price was up 0.51% to trade at ₹935.45 in the early hours of trading on Monday.

Read Next: Will Noel Tata’s Leadership Bring Reconciliation Between SP Group And Tata Group?

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