Neutral TATA Motors; target of Rs 416: Motilal Oswal

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Strong margin performance: Despite commodity headwinds, Tata Motors' EBITDA margin expanded 20bp QoQ to 11.9% in 2QFY27, driven by operating leverage, cost efficiencies, and improved realizations.
  • Resilient demand: CV demand is expected to remain healthy, supported by infrastructure activity, freight movement, and consumption-led demand, with industry growth expected in the high single digits to low double digits in 3QFY27.
  • Iveco acquisition: The acquisition process is progressing, with the offer price revised to EUR14.4 per share, and management remains confident of successful completion.
  • Electric vehicle momentum: Electric commercial vehicle momentum remains strong, with overall EV volumes increasing 143% YoY, and EV penetration in the SCV pickup segment expected to increase from ~12% in 2Q to ~20% by 4QFY27.

Thesis Validation Checklist

  • Margin trends: Watch for QoQ margin expansion despite commodity headwinds, driven by operating leverage and cost efficiencies.
  • Demand growth: Monitor CV demand growth, particularly in the high single digits to low double digits in 3QFY27, driven by infrastructure activity and consumption-led demand.
  • Iveco integration: Track the progress of the Iveco acquisition and its potential impact on Tata Motors' financials and operations.
  • EV adoption: Monitor the growth of electric commercial vehicles and the company's ability to increase EV penetration in the SCV pickup segment.