Tata Motors Faces Minor Setback as CLSA Adjusts Rating, Maintains Bullish Outlook

In a recent development, Tata Motors Ltd witnessed a marginal dip in its shares, down nearly a percent, following a downgrade by foreign brokerage house CLSA. The stock transitioned from a ‘Buy’ rating to ‘Outperform,’ attributed to the recent surge in its stock price. However, CLSA remains optimistic about Tata Motors’ growth potential and has revised the target price upward to ₹1,074 from ₹1,061 per share, indicating a potential upside of 11% from current market levels.

At 9:45 am, the scrip was trading almost flat at ₹954 apiece on the NSE, having reached an all-time high of ₹976.3 on the previous day. The stock has shown remarkable performance, rallying 125% over the past year and witnessing a 21% increase so far in the current year.

JLR’s Robust Performance: CLSA’s decision to downgrade the stock comes with acknowledgment of the impressive volume growth displayed by Tata Motors’ luxury vehicles arm, Jaguar Land Rover (JLR). JLR reported a substantial 14.5% YoY improvement in retail volumes in January 2024. The brokerage firm also highlighted that JLR’s volumes in the fourth quarter are surpassing those seen in the preceding December quarter.

Looking ahead, CLSA projects growth in JLR’s volumes in the UK, European Union, and China at 43%, 12%, and 38% YoY, respectively. The brokerage pointed out an increase in discounts on Jaguar vehicles in January 2024, while those on Land Rover witnessed a decline.

HSBC Maintains ‘Hold’ Rating: Another foreign brokerage, HSBC, has maintained a ‘Hold’ rating on Tata Motors with a target price of ₹920 per share. The report from HSBC highlights JLR’s resurgence in 2023, gaining market share among premium OEMs with significant sales increases in Europe and the USA. The market share of JLR’s luxury vehicles arm rose by 450 basis points to 20% in the previous year.

HSBC noted that JLR’s discounts or incentives in the US have increased but remain lower than the competition.

Analyst Consensus: Out of the 34 analysts tracking Tata Motors, 26 recommend a “buy,” five suggest “hold,” and three have a “sell” rating.

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