28 February 2024

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Tata Motors hit Rs 800 mark?

Tata Motors surge to 7-year high on strong growth prospects; can Tata Motors hit Rs 800 mark?

Tata Motors Ltd shares are trading at a seven-year high, breaking out of an 18-month consolidation period. The car stock has recovered 818% since a low of Rs 63.60 on March 24 amid the Covid-19 blues. The stock has reached new highs as a result of the Tata Group’s outstanding growth potential. Tata Motors shares touched a new 52-week high of Rs 584 on the BSE in the previous session. On Tuesday, the stock rose 3.23% intraday to Rs 584. Tata Motors’ stock afterwards closed 3.10% higher at Rs 583.30.

This year, the auto stock has increased by 50%. Brokerages predict that the stock will rise further from its present levels.

According to Prabhudas Lilladher, a brokerage business, India’s leading electric vehicle (EV) maker has nearly tripled its manufacturing capacity in the last three years.

The recent acquisition of Ford’s Sanand facility increased the automaker’s capacity to 1 million vehicles per year. According to Prabhudas Lilladher analysts, judicious capital expenditure in acquiring the factory resulted in a potential savings of Rs 5,000 crore. The brokerage has an accumulate call with a target of Rs 605 on the stock.

In a base case scenario, brokerage Jefferies has lifted its target price on Tata Group stock to Rs 700 from Rs 665 before. At a price target of Rs 790 a share, Jefferies sees a maximum upside of 40% for the stock.

“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 a 50% discount to transaction value in stake sale to TPG for India EVs,” Jefferies explained in a note.

According to Jefferies analysts, Tata Motors’ British affiliate Jaguar Land Rover (JLR) has successfully reduced its break-even production levels by 50% in fiscal year 2023. Jaguar intends to stop vehicle assembly at its Castle Bromwich plant as part of its transition to an all-electric platform. According to analysts, this strategic decision will increase the company’s utilisation levels.

Also Read: Nykaa share price targets: Nomura sees stock at Rs 183, Jefferies Rs 183, Macquarie Rs 115!

ICICI Direct has a buy call on Tata Motors with a target of Rs 700.

According to the brokerage, the company’s potential price performance is dependent on the company’s intention to eliminate car net debt by FY25 through good CFO production and the sale of non-core assets (including a stake sale in Tata Tech). JLR’s estimate for free cash flow generation of £2 billion and net debt reduction to less than £1 billion by FY24E are also noteworthy.

Will Tata Motors hit Rs 800 mark?

Gaurav Bissa, VP, InCred Equities, believes the stock will reach Rs 800 in the long run. “Tata Motors had a fantastic run beginning in 2020 that ended at the beginning of 2022.” Since then, the stock has been trading in an 18-month consolidation phase. On the weekly charts, the stock has produced a consolidation breakthrough, which could carry it towards Rs 600-620 levels in the immediate term. On the long-term charts, the stock has recently broken out of an 8-year descending trendline pattern. The breakout has been confirmed on the weekly charts, and a monthly closing above Rs 560 levels will begin a long-term rally to Rs 750-800 levels. 

The stock is experiencing a bullish MACD crossing, which is a buy signal and has a history of giving the stock price with a long-term trend. “The RSI is well below the overbought zone, implying that the stock can cover a lot of ground before entering overheat zones,” Bissa explained.