Tata Motors makes a U-turn from record high after CLSA downgrades Tata group auto major to 'outperform'; check out target price

Tata Motors shares slipped into the red on Thursday, retreating from an all-time high registered the previous day, after CLSA downgraded the Tata group auto giant’s stock to ‘outperform’ and revised its target to Rs 1,074 from Rs 1,060. At 9:35 am, the Tata Motors stock was down 0.3 per cent for the day at Rs 955 apiece on BSE, having registered an all-time high of Rs 976.3 apiece on Wednesday.  

The downgrade by the foreign brokerage comes after a recent run-up in the stock, which has already rallied 21 per cent so far in 2024 as against as against headline index Nifty50’s gain of around one per cent.

According to CLSA, volume growth of a year-on-year 14.5 per cent in Tata Motors subsidiary Jaguar Land Rover (JLR) is higher in comparison to the third quarter, with the British luxury carmaker being on a strong footing.

Reported the company is eyeing to monetise and list its EV unit- Tata Passenger Electric Mobility and for the same it is gearing to launch an initial public offering. 

Spin off of Tata Group's battery business

The company is considering and as per reports is currently in the early stages of discussions about eventually breaking out Agratas Energy Storage Solutions Pvt. as an independent unit. Such a structure would allow the battery business to raise funds and go public in Mumbai at a later stage.  A listing may value Agratas at $5 billion to $10 billion, depending on its growth and market sentiment.

Passenger vehicles market to moderate in FY25

Tata Motors Passenger Vehicles Managing Director Shailesh Chandra earlier noted that the growth in the passenger vehicle segment will moderate to below 5 per cent in the next fiscal. The company, however, expects electric vehicle sales to keep growing despite the slow pace of charging infrastructure development in the country.

"We had seen a very strong growth in FY23 of 25 per cent, which is likely to moderate in FY24 to about 8 per cent. Therefore, we are seeing with this high base effect, and FY25 will be slightly challenging with less than 5 per cent growth rate,"  said Chandra in an analyst call.

Technicals 

Relative Strength Index or RSI of the stock of 72.3 suggests an overbought condition, highlighting a likely correction in the due course of time. Nevertheless, Prashanth Tapse, Senior VP (Research), Mehta Equities has identified Tata Motors  as a top pick for immediate purchase, emphasizing a momentum play strategy.

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