Domestic brokerage Motilal Oswal has taken a 'neutral' stance on Tata Motors stock and has cut the target price from Rs 975 apiece to Rs 955 apiece. The brokerage sees headwinds ahead that could hurt its performance. 

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"While there is no doubt that Tata Motors has delivered an extremely robust performance across its key segments in FY24, there are clear headwinds ahead that could hurt its performance, especially at Jaguar Land Rover (JLR)," the report read. 

Further, on the valuation front, the brokerage expects JLR margins to remain stable over FY24-26, given: 1) rising cost pressure as it invests in demand generation, 2) normalizing mix, and 3) EV ramp-up, which is likely to be margin-dilutive. 

Moreover, as per brokerage, even in India business, both Commercial Vehicle (CV) and Passenger Vehicle (PV) businesses are seeing a moderation in demand. Thus, analysts expect flat margins for India business over FY24-26.

Tata Motors on Jun 11 conducted Investor Day wherein the Tata Group company highlighted the clear targets that it has set out for individual business segments, which include: 

1) CV business: a target for FCF of 6-8 per cent of revenue, resulting in strong ROCE, by growing ahead of the industry and achieving a strong double-digit EBITDA margin.

2) PV ICE business: positive and growing cash flows by improving market share to 16 per cent by FY27 and target for double-digit EBITDA margin. 3) EV business: achieve EBITDA break-even by FY26.

As per Motilal Oswal, while Tata Motor's India business has already become net debt-free in FY24, it has set a target for JLR to become net debt-free by FY25. Now, Tata Motor’s individual businesses are self-sustaining and investment spending is well funded.

In a year, Tata Motors shares have grown 76 per cent against Nifty50's rise of over 25 per cent.

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