The big upgrade from CLSA- it has upgraded Tata Motors to High Conviction Outperform from Outperform with a target price of Rs 930. This implies over 30% upside from current levels.
The stock has corrected 40% in the past six months on account of various reasons including weak demand outlook for JLR across key markets and moderation in demand expectation for HCVs and PVs in the local market. Additionally, the risk of import tariffs getting implemented in the US from the EU and its impact on JLR’s US sales is also weighing on the sentiment.
The question then is what triggered the upgrade from CLSA?
Here is a quick look at 5 reasons why CLSA expects the Tata Motors share price to rally –
1. Implied value of JLR attractive
The CLSA report highlights how they are expecting JLR to clock “7% volume, 8.8% average EBIT margin for FY26-27CL, average capex of GBP4.4bn for FY26-27CL,” after a few flat years. Additionally, they believe that “in FY27, JLR’s free cash flow could be 1.7 billion pound after registering sub-1 billion pound of free cash flow for two years.” They see the “Implied value of JLR at today’s price at Rs73,000 crire (Rs200/share), resulting in it operating at an attractive 23% FCF yield.”
2. Current correction scope to buy
CLSA believes that the adversities in the JLR’s business model are already priced in. CLSA’s sensitivity analysis of per share value of JLR indicates “that it would decline by Rs 28. With per share fair value of JLR already being down to Rs 200 from Rs 450, we believe these adversities are well priced in and current correction is giving scope to add.”
3. BMW and Daimler recover from November lows
CLSA pointed out that some of JLR’s key peers BMW, Daimler have recovered 25% from their November lows till date. After the December quarter performance when JLR delivered 3% YoY volume growth with EBIT margin at 9.1%, they “expect JLR to be on course for a seasonally strong Q4, thus delivering better numbers compared to December quarter and “it is sitting on well managed inventory levels.”
4. Jaguar EVs in mid-CY26
CLSA is betting on JLR’s EV plans as well. Jaguar is scheduled to launch its EVs from mid-CY26. “With capex of 3.7 billion pound in FY25 with focus towards developing EV models, JLR is confident to execute 1 billion pound free cash flow in FY25. Thus, with lower FCF breakeven volume level of 325000 units p.a., JLR needs 20% volume decline to deliver negative FCF,” they explained, highlighting the scope of a positive surprise.
5. Growth in CV market in India
CLSA pointed out that the extent of decline in CV cycle is far limited than what was expected earlier. Given the consensus estimates of CV industry peer Ashok Leyland, there is “expectation of growth in CV space in FY26, with no margin cut subsequently. If we built in that assumption for TTMT in FY26, per share value would increase by Rs 35.” This outlook for Cvs is seen as a key positive for Tata Motors. They believe the “cyclical revival from FY27, would start getting priced in coming quarters, as we enter FY26.”
However, CLSA highlighted that there are areas of concern ad investors need to watch out for monthly retail demand/discounting for JLR in key markets, tariff implementation by US on imports from EU, if any, Chinese OEM grabbing market share in EU/UK, domestic M&HCV monthly retails and new launches in Tata Motors Passenger Vehicle portfolio. Tata Motors is currently tied neck and neck with Hyundai Motor India in second and third position, in terms of overall PV market share.