Tata Motors Receives “Buy” Rating from Nomura, Shares Reach All-Time High
Tata Motors, the Indian multinational automotive manufacturing company, has received a significant boost in its stock value after Nomura, a global broking firm, revised its rating for the company from “Neutral” to “Buy.” This change has made Tata Motors shares more appealing to potential investors, leading to a surge in the company’s stock price.
The revised rating by Nomura is based on the performance of Jaguar Land Rover (JLR), a subsidiary of Tata Motors. According to Nomura’s assessment, JLR has the potential to generate substantial profits for Tata Motors. This positive outlook has prompted Nomura to increase the pricing target for Tata Motors by 26%, from Rs 1,141 to Rs 1,294.
One of the key factors driving this optimism is Tata Motors’ plan to demerge its commercial vehicle (CV) and passenger vehicle (PV) divisions. Nomura believes that this move has the potential to unlock value for the CV component of the company. By separating the two divisions, Tata Motors aims to maximize profits and create distinct vehicles tailored to different market segments.
The market response to this news has been overwhelmingly positive, with Tata Motors’ stock reaching an all-time high of Rs 1,071 in the early trading session. This represents a significant increase compared to the previous closing price of Rs 1,027.65. Over the past year, Tata Motors’ stock has experienced a remarkable growth of 67%, and in just two years, it has increased by an impressive 137%.
The strong performance of Tata Motors has also contributed to the company’s overall market value, which now stands at 3.55 lakh crore rupees. Nomura’s recommendation to increase the target multiple for JLR from 2.75 times to 3.5 times its Enterprise Value-to-EBITDA ratio further reinforces the potential for positive outcomes.
Looking ahead, Tata Motors is projected to see a significant increase in its EBIT margins. The company’s margins are expected to grow by 8.5% in 2025, up from 7.8% in the previous year. This upward trajectory is anticipated to continue, with the margins reaching 10.1% by fiscal year 2027 and the potential to go even higher, reaching 11-12% by fiscal year 2030.
Tata Motors’ impressive financial performance has been reflected in its recent quarterly results. The company reported a net profit of 17,407 crore for the period ending in March 2024, aided by a tax credit of 8,159 crore. This is a significant increase compared to the net profit of 5,400 crore reported in the fourth quarter of the previous fiscal year.
Furthermore, Tata Motors saw a notable increase in revenue during the January-March quarter of the financial year 2023-24. Revenue reached Rs 1.20 lakh crore, representing a growth of over 14% compared to the third quarter of the same fiscal year, which recorded revenue of Rs 1.05 lakh crore. The company’s EBITDA also experienced a substantial year-on-year increase of 33%, climbing from Rs 12,810 crore to Rs 17,035 crore.
In conclusion, Nomura’s revised rating for Tata Motors has had a significant impact on the company’s stock value, propelling it to an all-time high. The positive outlook for JLR and the potential value unlocked by the demerger plan have attracted investors’ attention. With projected growth in EBIT margins and strong quarterly results, Tata Motors is well-positioned for continued success in the automotive industry.
