Shares of Tata Motors Ltd are trading at a seven-year high, breaking out from the long consolidation phase of 18 months. The auto stock, which fell to a low of Rs 63.60 on March 24 during the Covid-19 blues has recovered 818% till date. The stock is trading at fresh highs, thanks to strong growth prospects of the Tata Group firm. In the previous session, shares of Tata Motors hit a fresh 52-week high of Rs 584 on BSE. The stock gained 3.23% intraday to Rs 584 on Tuesday. Later, the Tata Motors stock closed 3.10% higher at Rs 583.30.
The auto stock has surged 50% this year. According to brokerages, the stock is likely to see a further upside from the current levels.
Brokerage firm Prabhudas Lilladher said that India's largest electric vehicle (EV) maker has expanded its manufacturing capacity by nearly three times in the last three years.
The recent buy of Ford's Sanand plant has raised the automobile major's capacity to 1 million units per year. A potential savings of Rs 5,000 crore were achieved through prudent capital deployment in acquiring the plant, analysts at Prabhudas Lilladher said. The brokerage has an accumulate call on the stock with a target of Rs 605.
Brokerage Jefferies has raised the target price on the Tata Group stock to Rs 700 from an earlier Rs 665 in a base case scenario. Jefferies sees a maximum upside of 40% for the stock at a price target of Rs 790 per share.
"The price target of Rs 700 is based on 11X FY25E EV/ EBITDA for India CVs, 10X FY25E EV/EBITDA for India PVs, 2.3X FY25E EV/EBITDA for JLR, and 50% discount to transaction value in stake sale to TPG for India EVs," Jefferies said in a note.
Analysts from Jefferies said Tata Motors' British arm Jaguar Land Rover (JLR) has successfully scaled back its break-even production levels by 50 percent in the fiscal year 2023. As part of its transition to an all-electric platform, Jaguar plans to cease vehicle assembly at the Castle Bromwich plant. This strategic move is expected to enhance the company's utilisation levels, according to analysts.
ICICI Direct has a target of Rs 700 with a buy call for the Tata Motors stock.
According to the brokerage, the company’s future price performance depends on the intent to go auto net debt free by FY25 though healthy CFO generation and sale of non-core assets (including stake sale in Tata Tech). Other factors to watch out for are JLR guiding for free cash flow generation of £2 billion & net debt reduction to less than £1 billion by FY24E.
Gaurav Bissa, VP, InCred Equities expects the stock to hit Rs 800 mark in the long term. "Tata Motors enjoyed a dream run from 2020 which fizzled out at the beginning of 2022. Since then, the stock was seen trading in a consolidation phase which lasted for 18 months. The stock has given a consolidation breakout on the weekly charts, which can push it towards Rs 600-620 levels in the short term. On the long-term charts, the stock has witnessed a fresh breakout from 8-year descending trendline pattern. The breakout has been confirmed on the weekly charts and a monthly close above Rs 560 levels will trigger an upside to Rs 750-800 levels in the long term. The stock is witnessing a bullish MACD crossover, which is a buy signal and has a history of providing long-term trend to the stock price. The RSI is well below the overbought zone, which implies the stock can cover a lot of territory before entering overheat zones," said Bissa.