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On Thursday, HSBC analyst Yogesh Aggarwal adjusted the firm’s stance on Tata Motors Ltd (NSE:TAMO). (TTMT:IN), downgrading the rating from "Buy" to "Hold," while simultaneously raising the price target to INR770.00 from the previous INR700.00. The revision reflects a complex set of challenges faced by the company, including increased tariffs on US imports, which is a significant market for Tata Motors (NYSE:TTM).
Aggarwal cited several factors contributing to the downgrade, including an ageing portfolio at Jaguar Land Rover (JLR), loss of domestic electric vehicle (EV) and passenger vehicle (PV) market share, and a lackluster commercial vehicle (CV) market. These issues have reportedly squeezed the company from multiple directions, leading to the revised outlook.
The report noted that the US market, which accounts for 32% of Tata’s total FY25 performance, will now see approximately 70% of its exports subjected to a 10% import duty, with the remaining facing around a 30% duty. This increase in tariffs is expected to negatively affect demand for Tata’s vehicles in the US.
Furthermore, Tata Motors’ domestic PV market share is under pressure due to relentless competition. The recovery in the CV cycle is also described as gradual at best. Despite these headwinds, Aggarwal suggests that the valuations of Tata’s three business segments remain undemanding.
Aggarwal elaborated on the challenges faced by JLR, indicating that the near term is likely to be impacted by exceptionally weak seasonality, which could affect the luxury automobile manufacturer’s performance. The combination of these factors has led to the revised rating, even as the price target suggests a potential undervaluation of the stock.
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