Tata Motors Upgrade By Nomura Helps Nifty Auto Surge In Trade
According to Nomura, Jaguar Land Rover’s execution could lead to significant upside.
Tata Motors Ltd. is leading the Nifty Auto amid an upgrade by Nomura. The brokerage has upgraded the stock to a ‘Buy’ rating from the earlier ‘Neutral’, and raised the target price to Rs 1,294 apiece, up from Rs 1,191, implying an upside of 26% from the previous close.
The Nifty Auto rose more than a percentage point as compared, with the Nifty 50 which was trading largely flat to negative in trade today. The index is also close to its all-time-high of 24,990.
As of 2:40 p.m., the stock was trading at Rs 1,088.8 apiece, up 5.93%, versus the Nifty 50, which was trading at 24,399, down 0.06%.
According to Nomura, Jaguar Land Rover’s execution could lead to significant upside. The division’s earnings growth can be stronger due to a rise in average selling prices as well as margins, it said. They expect JLR's EBIT margin to expand to 8.5% in FY25 versus 7.8% for the previous fiscal and see it expanding to double digits by fiscal 2027.
It will be supported by JLR's electric vehicle transition and premium push for the Range Rover brand, Nomura said.
In its Q4 earnings presentation, Tata Motors said that they will "surprise everyone with their ‘New Jaguar’ as they completely refurbish the Jaguar line-up starting next year". They are also expected to launch the Range Rover EV and the company has secured roughly 39,000 units, it said.
Nomura has raised the target multiple for JLR to 3.5 times EV/Ebitda from 2.75 times, leading to the price increase.
Tata Motors' launch of the Curvv on Aug. 7 and the Harrier EV in FY25F should support India's volume, according to Nomura. The company also highlighted during the Q4 earnings that Nexon in the CNG variant could be launched this year. This will aid significant volume growth for the company and compete with Maruti Breeza and Ertiga, both in CNG variants.
The demerger of the commercial vehicle division will also be key to unlocking value for the division, said Nomura. They have also raised the target multiple for CVs to 11 times EV/Ebitda from 10 times.
