Tata Motors Shares Surge to Record High Following Nomura Upgrade

Nomura's reassessment comes with an increased price target of ₹1294 per share, up from the previous ₹1141.

Tata Motors’ stock witnessed a notable surge of 5.65 per cent, reaching an all-time high of ₹1084.90 per share on the National Stock Exchange (NSE). This significant rise followed an upgrade from Japanese brokerage firm Nomura, which shifted its rating on Tata Motors Ltd. from ‘Neutral’ to ‘Buy’.

Nomura's reassessment comes with an increased price target of ₹1294 per share, up from the previous ₹1141. This revised target suggests a potential upside of 26 per cent from Wednesday's closing levels, marking it the most optimistic forecast among analysts. The primary driver behind this upgrade is the anticipated improvements in Jaguar Land Rover's (JLR) execution and performance.

A key element of Tata Motors' future strategy involves the proposed demerger plan to separate its passenger vehicle (PV) and commercial vehicle (CV) businesses. Nomura believes this move could significantly unlock value for the CV segment.

Additionally, Nomura has raised its target multiple for JLR to 3.5 times its Enterprise Value-to-EBITDA (EV/EBITDA), up from 2.75 times, to reflect these expected upsides. The brokerage forecasts EBIT margins to rise from 7.8 per cent in FY25 to 10.1 per cent by FY27, with the potential to further increase to 11-12 per cent by FY30. This growth is anticipated to be fueled by the reduction of Jaguar's internal combustion engine (ICE) models, the successful launch of new Jaguar electric vehicles (EVs) on the JEA platform, and a broader range of premium Range Rover variants.

Currently, Tata Motors trades at 5.4 times its FY26 EV/EBITDA. The company, which had a net debt of ₹16,000 crore (₹44 per share) in FY24, is expected to achieve a net cash position of ₹57 per share by FY26 and ₹140 per share by FY27.

However, Nomura has also highlighted several potential risks, including a sharp decline in demand in key markets such as China and the European Union, as well as increasing incentives which could impact profitability.

Despite these risks, Tata Motors has shown robust performance over the past year. In the last month alone, the stock has returned 13.09 per cent. Over the past six months, it has climbed by 33 per cent, and year-to-date, the stock has surged by 36.59 per cent. Over twelve months, Tata Motors has delivered a remarkable 68.84 per cent return, underscoring its sustained growth and appeal to investors.

This bullish outlook for Tata Motors comes at a time when the global automotive industry is undergoing significant transformations, driven by a shift towards electrification and sustainability. Tata Motors, with its strategic focus on EVs and premium market segments, appears well-positioned to capitalize on these trends.