The Tata Motors share price continues to be in focus. While most brokerages have turned cautious after a disappointing Q1, BNP Paribas has an Outperform rating on the stock. The price target for Tata Motors at Rs 765 per share implies 21% upside from curret levels. This is significantly higher than some other brokerage houses like Jefferies, with targets closer to Rs 550 levels. The big question is what’s driving the optimism for BNP Paribas?
3 reasons why BNP Paribas is bullish on Tata Motors
BNP Paribas has cut the target price for Tata Motors but retained the Outperform on attractive valuations-
BNP Paribas on Tata Motors: Risk priced in after recent correction
BNP Paribas, in its note, pointed out that while “Tata Motor’s equity story is fraught with risk and volatility, the recent stock-price correction appears more than pricing in the risks.”
JLR’s margin was impacted 380 bps by tariffs, “part of which could revert in the coming quarters. While Q1 JLR demand was below management’s expectations, it expects wholesale dispatches to gradually recover from here,” BNP Paribas added.
Jaguar Land Rover sees tariff hurting profitability by 400-500 million pound in FY26. This could be around 200 bps, well with the brokerage house’s estimate of “80-250 bps hit in FY26 and by 400 million pound or 120 bps over the medium term.”
BNP Paribas on Tata Motors: Can CV business help
Outlining the risks nevertheless, they also pointed out that “JLR will also be absorbing a premium tax in China in the near-term. Tata Motors domestic PV EBITDA margin also fell sharply QoQ due to higher discounting and model transition.” However, “on the positive, the CV outlook looks better with growth and margin showing signs of improvement.”
The automotive major’s global CV revenue of Rs 17,100 crore was lower than the BNP Paribas estimates by 5 bps. The gross margin improved by 190 bps QoQ on the back of better realisations and lower material cost. However, the EBITDA margin of 13.1% (+c25bp y-y) was in-line with our expectation.
BNP Paribas on Tata Motors: The big tariff burden
Tata Motors’ consolidated revenue beat estimates “aided by a better mix and realisation at JLR. However, EBITDA margin missed estimates, impacted by tariffs and weak volume across business verticals. CV Business EBITDA was in-line while for PV and JLR it was below our expectations,” BNP Paribas added.
According to them, JLR’s profitability was hurt by a higher tariff rate in Q1FY26, however, the company expects it to reduce in subsequent quarters. Tata Motors expects the domestic CV business sales volume to grow in mid single digits and retained JLR’s margin guidance. Tata Motors is also targeting to get back to double-digit EBITDA margin in the PV business. This also adds to the positive expectations going forward.