Rakesh Jhunjhunwala-owned Tata Motors has rallied 48% so far this month to trade at Rs 501 per share and could extend its massive up-move.
Rakesh Jhunjhunwala-owned Tata Motors’ share price has rallied 48% so far this month to trade at Rs 501 apiece and could extend its massive up-move, according to global brokerage firm Jefferies. Analysts have increased the target price for Tata Motors to Rs 625 per share from Rs 565 apiece earlier, on improving India franchise, early leadership in EVs in India, and JLR focus returning to the higher-margin Land Rover brand. Big Bull Rakesh Jhunjhunwala owned 3.67 crore equity shares of Tata Motors at the end of September, according to the company’s shareholding pattern available on the stock exchange website.
More market share gains on the anvil
Jefferies has taken note of Tata Motors newest vehicle launch — Tata Punch. The new vehicle is expected to accelerate the market shift. “Availability of lower-priced well-styled SUVs such as Tata’s Punch should accelerate the shift from the premium hatchback and small sedan segments, which form about 35% of industry volumes,” they said. Tata Motors saw its market share drop to 5% in the financial year 2019-20. “Its new SUVfocussed portfolio, improved product styling, and brand positioning around safety have fueled a strong turnaround, with market share recovering to 11% in 1HFY22, and we see further upside potential from Punch,” Jefferies added.
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Target price scenarios
Under the Base Case scenario, Jefferies has a target price of Rs 625 per share on Tata Motors based on 6.0x Sep’23E P/B for standalone, 2.5x Sep’23E EV/EBITDA for JLR, and 50% discount to transaction value in stake sale to TPG for India EV business. Analysts have estimated standalone volumes to grow 42%/21%/11% in FY22/ FY23/FY24 under the base case scenario. The base case sees 24.7% upside potential.
In the downside scenario, the brokerage firm expects standalone volumes to grow 37%/16%/6% in FY22/ FY23/FY24; margin ~100bps below base case. A target price of Rs 415 per share is estimated, implying 17% downside.
The upside scenario for Tata Motors estimates standalone volumes to grow 47%/26%/16% in FY22/23/FY24 with margins ~100bps above base case. While for Jaguar Land Rover volumes are expected to fall 2% in FY22E but grow 37%/12% in FY23E/FY24E. A target price of Rs 800 per share has been set for this scenario, implying a 59% upside.
Rakesh Jhunjhunwala’s stake
Rakesh Jhunjhunwala had purchased Tata Motors shares last year in September when the stock had been battered down by the covid-19 aided sell-off in global equities. The ace investors had then trimmed his holding in Tata Motors, booking partial profits in the first quarter of this financial year. With 3.67 crore equity shares still in his portfolio, Rakesh Jhunjhunwala owns a 1.1% stake in the company, valued at Rs 1,841 crore today.