Tata Motors share price, Tata Motors Q4 review: Tata Motors shares hit a 52-week high of Rs 537.15 apiece on the BSE in early morning deals on May 15 after the auto major impressed Street with its March quarter numbers. The results were declared post-market hours on Friday, May 12, 2023. Besides, the management's commentary on the demand outlook remained optimistic, with a pending order book of 2 lakh units for JLR as of Q4 FY23 end vs. 2.15 lakh units as of Q3 FY23. It informed about a dip in order book largely due to increased wholesale, but the company does not foresee demand moderation. Additionally, it has guided for wholesale of 4 lakh+ units for FY24E amid improving chip supplies and expects gradual improvement in quarterly performance.

Further, the management said that the wholesales in Q1 FY24 will be similar to Q4 FY23. Also, the breakeven point continues to remain at 3 lakh units, note analysts. Moreover, the company's flagship unit, JLR, aims to cut net debt by 2 billion pounds (GBP2b) in FY24.

Taking into account these positive triggers and an optimistic outlook, most brokerages are upbeat about the company's prospects and have revised their target prices for the stock. For instance, analysts at Motilal Oswal said, "Tata Motors’ 4QFY23 result was a strong beat across businesses, resulting in a consolidated PAT of Rs 56 b (v/s est. of Rs 27 b). Consolidated net debt (auto) was reduced from Rs 138b QoQ to Rs 437b. With expected JLR wholesales of nearly 400K in FY24, management is targeting a >6 per cent EBIT margin, free cash flow (FCF) of GBP2b, and reducing net debt to <GBP1b. India businesses are focused on margin expansions as volume growth is likely to moderate in FY24."

"We upgrade our consolidated earnings per share (EPS) by 13 per cent /6 per cent for FY24E/25E to factor in JLR’s volume ramp up as well as moderation in certain costs and margin improvements in India businesses," wrote Jinesh Gandhi, Amber Shukla, and Aniket Desai, research analysts at the brokerage firm, in the earnings review note. They have maintained 'BUY' on the stock with a March'25 SOTP-based target price of Rs 590.

Prabhudas Lilladher shares similar views. The brokerage has maintained a positive stance on the stock given JLR’s volume ramp-up, resulting in strong revenue, profitability, and FCF (aided by a high order book), the CV segment (on the domestic side) benefiting from ongoing upcycle, operating leverage, and tailwinds from lower commodity costs and lower discounting, and a strong market share in the PV segment (13.5 per cent vs 8 per cent in FY21) led by a revamped portfolio, a rising SUV share, and rising EV penetration. The brokerage has "BUY" on the stock with a target price of Rs 605.

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A host of foreign brokerages, too, have revised their target prices higher. CLSA has maintained "BUY" with a target price of Rs 624 from Rs 544 earlier. Jefferies has revised the target to Rs 655 from Rs 600 earlier. Nomura has also given a "buy" call on Tata Motors with a target price of Rs 610.

ICICI Securities have also maintained "BUY" on the stock, given healthy profitability across all business segments, JLR's volume recovery on the anvil, and reiterated focus towards EV space at JLR coupled with healthy FCF generation targets for FY24E. The brokerage has upgraded its estimates, and the target price now stands at Rs 650 on a SOTP basis.

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The brokerage has listed key triggers for future price performance. They are -

• We expect a healthy 20.1% revenue CAGR over FY23-25E driven by 10% total volume CAGR amid healthy wholesale visibility on the JLR front
• Demonstrated capability in newer technologies in CV space & pricing discipline across the industry to aid the aspiration of double-digit margins ahead
• Dominant position in domestic electric-PV space with 80%+ market share
• Firmer commitment towards EV by JLR with an accelerated investment plan of £15 billion spent over the next five years coupled with a healthy FCF generation target of £2 billion & net debt reduction to <£1 billion by FY24E
• Intent to go auto net debt free (most likely in FY25) through healthy CFO generation and sale of non-core assets (including stake sale in Tata Tech)

Key risks include lower than built-in volume ramp-up at JLR and consequent FCF generation and slower than anticipated margin recovery in Indian operations, it notes.

STOCK PERFORMANCE

In the last 12 months, the stock has rallied 27 per cent (as of Friday's close). In comparison, the Nifty Auto index has slipped nearly 31 per cent while the Nifty50 index has risen 15.6 per cent, as per Trendlyne.