Tata Motors share up 6%; Buy stock as JLR valuations at historical lows, says Emkay
Tata Motors stock price: The Tata group stock climbed 5.54 per cent to hit a high of Rs 628.05 on BSE. The recent tariffs have sparked fears of a sharp increase in vehicle costs.
- Apr 15, 2025,
- Updated Apr 15, 2025 10:08 AM IST
Tata Motors Ltd saw its shares rallying 6 per cent in Tuesday's trade amid value buying. The scrip, which has lost 38 per cent of its market value in the past one year, is completely ignoring JLR valuations, said domestic brokerage Emkay Global.
Out of the 27 per cent plunge on the counter in the past three months, 17 per cent drop has been seen since last week of March when the US announced 25 per cent tariffs on imports of auto and auto parts, exacerbating investor concerns on the prevailing weakness in China (North America is JLR’s largest market – 32 per cent of FY25 wholesales.
The recent tariff announcements have sparked fears of a sharp increase in vehicle costs, with second order impact of a potential economic downturn in the US. On Tuesday, the stock climbed 5.54 per cent to hit a high of Rs 628.05 on BSE.
Emkay Global said JLR’s implied FY27 EV/Sales at 0.7x is near the historical lows of 0.5x, amid the noise around macros. This is even as Tata Motors has witnessed a strong, operational and financial turnaround, culminating in meeting the stated net-cash balance sheet objective in FY25.
"Even with bear case assumptions of a 25 per cent drop in US sales next year, the bigger Tata Motors financial health improvement story remains largely intact – net auto debt-to-equity at 0.24x in FY27 (bear case) vs 0.1x in FY25E; 1.1 times in FY22. We trim FY25/FY26/FY27 EPS by 5-6 per cent to factor in some of the potential weakness. We retain Buy while cutting our target price (SoTP-based) by 16 per cent to Rs 800," Emkay Global.
The domestic brokerage said it has incorporated a degree of volume weakness into its earnings estimates, reflecting a 5 per cent decline in sales across the US and China, and flat non-US sales in FY26.
This is followed by Emkay Global's projection of flat total volumes in FY27. In addition, Emkay conducted a stress test scenario, assuming a significant 25 per cent decline in North American volumes in FY26E and a 15 per cent decline across other geographies. This resulted in an estimated 18 per cent year-over-year decline in JLR’s overall volumes for FY26E. The stress case also factored in lower average selling prices (ASPs) and compressed margins, Emkay said.
Tata Motors Ltd saw its shares rallying 6 per cent in Tuesday's trade amid value buying. The scrip, which has lost 38 per cent of its market value in the past one year, is completely ignoring JLR valuations, said domestic brokerage Emkay Global.
Out of the 27 per cent plunge on the counter in the past three months, 17 per cent drop has been seen since last week of March when the US announced 25 per cent tariffs on imports of auto and auto parts, exacerbating investor concerns on the prevailing weakness in China (North America is JLR’s largest market – 32 per cent of FY25 wholesales.
The recent tariff announcements have sparked fears of a sharp increase in vehicle costs, with second order impact of a potential economic downturn in the US. On Tuesday, the stock climbed 5.54 per cent to hit a high of Rs 628.05 on BSE.
Emkay Global said JLR’s implied FY27 EV/Sales at 0.7x is near the historical lows of 0.5x, amid the noise around macros. This is even as Tata Motors has witnessed a strong, operational and financial turnaround, culminating in meeting the stated net-cash balance sheet objective in FY25.
"Even with bear case assumptions of a 25 per cent drop in US sales next year, the bigger Tata Motors financial health improvement story remains largely intact – net auto debt-to-equity at 0.24x in FY27 (bear case) vs 0.1x in FY25E; 1.1 times in FY22. We trim FY25/FY26/FY27 EPS by 5-6 per cent to factor in some of the potential weakness. We retain Buy while cutting our target price (SoTP-based) by 16 per cent to Rs 800," Emkay Global.
The domestic brokerage said it has incorporated a degree of volume weakness into its earnings estimates, reflecting a 5 per cent decline in sales across the US and China, and flat non-US sales in FY26.
This is followed by Emkay Global's projection of flat total volumes in FY27. In addition, Emkay conducted a stress test scenario, assuming a significant 25 per cent decline in North American volumes in FY26E and a 15 per cent decline across other geographies. This resulted in an estimated 18 per cent year-over-year decline in JLR’s overall volumes for FY26E. The stress case also factored in lower average selling prices (ASPs) and compressed margins, Emkay said.