Tata Motors Shares Continue Bull Run: Why This Analyst Advises Caution

Tata Motors shares have been having a great time at the bourses in the past few weeks. Tata Motors’ share price has gone up over 13% in the past month. However, analysts at HDFC Securities do not seem convinced.

The Tata Motors Analyst: The analyst team led by Aniket Mhatre at HDFC Securities maintained their ‘reduce’ rating for the stock with a price target of ₹457 — a downside of around 14% from the stock’s last closing price of ₹530.85.

The Tata Motors Thesis: The brokerage firm noted that the company’s net profit did beat estimates largely on account of higher capitalization at Jaguar Land Rover. However, despite management's efforts, JLR's net debt reduced by just GBP 200 million in FY23 vs FY22.

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Going forward, JLR has guided for free cash flow of over GBP 2 billion and a reduction in net debt to GBP 1 billion in FY24. However, the firm highlighted that JLR had given a similar 5% margin guidance in FY23, but achieved just under 50% of that. The firm further added that “given the geopolitical headwinds and resultant concerns around demand slowdown in its key regions, the current guidance appears highly optimistic.”

The firm noted that the automobile giant has lost substantial market share in commercial vehicles in FY23 and demand is subdued in passenger vehicles due to macroeconomic factors.

However, several other analysts have remained strongly bullish on the stock. Goldman Sachs maintained its ‘buy' call on the stock, raising the price target to ₹600 from ₹550. Nomura also maintained its ‘buy' rating for the stock with a price target of ₹610, up from the ₹508 target it had assigned earlier. Jefferies also maintained the ‘buy' rating for the stock, with a price target of ₹665.

Price Action: Tata Motors’ share price was up 0.45% to trade at ₹533.25 in the early hours of trading on Tuesday.

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Posted In: EquitiesMarketsHDFC SecuritiesJaguar Land RoverTata GroupTata Motors