U.S. stocks lower as investors rotate out of tech ahead of Jackson Hole
On Thursday, Emkay Global raised the rating for Tata Motors (NYSE:TTM) Ltd. (TTMT:IN) (NYSE: TTM) stock from 'Add' to 'Buy', maintaining a price target of INR1,175.00.
The firm's decision follows a 16% decline in Tata Motors' stock price from its peak, a trend partly attributed to a sector-wide downturn influenced by factors such as a reduced outlook for competitor BMW (ETR:BMWG), muted demand in China, and a slowdown in India's commercial and passenger vehicles, which includes increasing discounts and price cuts.
Despite these market challenges, the analyst from Emkay Global highlighted several positive aspects for Tata Motors. The report noted that Jaguar Land Rover (JLR), Tata Motors' luxury vehicle unit, is less exposed to the Chinese market compared to BMW, with China representing approximately 24% of JLR's sales versus BMW's 32%. The analyst also pointed out that JLR's profitability and debt outlook remain largely stable.
In the domestic Indian market, the outlook for commercial vehicles (CVs) is reportedly on the upswing, with expectations of a robust increase in margins driven by healthy fleet operator profitability and sustained pricing discipline.
Furthermore, new product launches and lower inventory levels are anticipated to contribute to Tata Motors outperforming the overall weak passenger vehicle (PV) industry.
The analyst also made a note of Tata Motors' improved balance sheet, stating that the company's valuations are now among the least demanding in the original equipment manufacturer (OEM) sector.
However, due to the current market environment, Emkay Global slightly reduced its earnings per share (EPS) estimates for Tata Motors for the fiscal years 2026 and 2027 by approximately 2.5%, with projected revenue and profit before tax (PBT) compound annual growth rates (CAGR) of 5% and 11%, respectively.
In other recent news, Tata Motors Ltd. continues to make headlines with its financial performance and strategic initiatives. UBS has maintained its sell rating on Tata Motors, citing strong demand for Jaguar Land Rover's (JLR) premium models.
This demand has enhanced the company's average selling prices and gross margins. However, UBS also noted a potential moderation in demand as the order book for these models begins to fall below pre-COVID levels.
On a different note, Nomura/Instinet upgraded Tata Motors from Neutral to Buy, attributing this to a strategic shift at JLR. This shift, coupled with increased average selling prices and profit margins, is expected to drive the company's earnings growth. Goldman Sachs, Jefferies, and JPMorgan reaffirmed their ratings for Tata Motors, emphasizing its potential for growth and strategic initiatives.
Tata Motors is also progressing with a demerger process expected to conclude within the next 12 months and plans to commence in-house manufacturing of lithium-ion cells by 2026. These are among the recent developments for Tata Motors.
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