Tata Motors Stock Target Price:Brokerage house UBS has alerted Tata Motors, the giant company of Tata Group in the auto sector. The brokerage believes that pressure can be seen on this auto stock in the next few months. The stock can fall by about 16 percent from its current price of Rs 1036 to Rs 825. UBS has given a Sell rating on Tata Motors stock. Tata Motors stock has proved to be a multibagger for investors. It has given a return of 658 percent in the last 5 years. The brokerage has also listed some important reasons behind the possibility of a fall in the stock.
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Tata Motors : Sell rating on stock
Brokerage house UBS has given a Sell rating on Tata Motors and reduced the target price by 16 per cent to Rs 825 from the current price. The brokerage has valued JLR at Rs 340. While the value of the Indian CV / PV segment is Rs 280 and Rs 170 at 10x/14x one-year EV / EBITDA. While the value of investment in subsidiary companies / associates is Rs 35. The brokerage says that due to high valuation, there is a risk of further decline in the stock due to the reduction in margins within JLR and Indian PV (especially the EV arm) on any significant shortfall in performance.
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Brokerage house UBS says that JLR has performed well in terms of ASPs and margins in the last few years due to strong demand for its latest launches – Defender, Range Rover and Range Rover Sport. This trio is JLR’s premium models and has significantly boosted its ASP and GM. JLR has used the semiconductor shortage to balance production in favor of these models, reducing its dependence on low price/margin models.
Order book below pre-Covid levels
According to the brokerage house, ASP/GM grew from £49,000/26.7% in FY20 to £72,000/31% in FY24 as incentives fell to the lowest level among peers. The success of these models has also mitigated the impact of a relatively weak recovery in China, its highest margin market. However, the extended successful operation of these models has started to moderate and the order book is now below pre-Covid levels.
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The Defender, launched in 2020, was the first model whose incentives started increasing in July 2023. However, the significant growth in incentives has not been able to support volumes, with the brand reporting a year-on-year decline in Q1FY25. Discounts for the Range Rover Sport, which changed platforms in 2022, increased abruptly from near-zero levels in July 2024. It is also JLR’s best-selling model in the US. We expect discounts to continue to grow visibly, even though near-term deliveries may be impacted due to flood disruptions at aluminium suppliers.
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Discount may increase on Range Rover
According to the brokerage house, JLR’s order backlog is already below pre-Covid and incremental booking supply is lacking. Incentives for Range Rover-JLR’s top models may soon start increasing from zero levels. Rising discounts, moderate growth and lack of any new ICE/hybrid launches could lead to a very weak financial position for FY26, even if the consensus sets aside the last 2 years’ results. The softening in JLR volumes comes at a time when CV demand in India is faltering, while passenger vehicles (PVs) have started underperforming their regional peers in terms of growth and margins.
(Disclaimer: The views or advice on the stock are given by the brokerage house. These are not the personal views of Financial Express. There are risks in the market, so take expert advice before investing.)
