Motilal Oswal Financial, while downgrading its ratings on Tata Motors to ‘neutral’ from ‘buy’ with a target price of ₹1,000, said the current price has factored in all triggers.
“While the demerger seems to be a step in the right direction, we do not foresee any need to revisit our target price,” said the brokerage. “Given the limited upside after the recent sharp run-up, we downgrade the stock to ‘neutral’.”
AgenciesPost demerger, the passenger vehicles (PV) and commercial vehicles (CV) businesses will be two separately listed entities. Investors can opt to hold either the CV business, which includes the truck and buses segment, or the more profitable PV business, which includes the UK-based subsidiary Jaguar Land Rover (JLR) and electric vehicles segment. Analysts said the benefit of having a separate listed CV entity is that this business can access capital markets.
“We don’t see this as any value unlocking event as the respective businesses were being adequately valued in the current valuation,” said a note by ICICI Securities. “However, a potential value-unlocking event post this separation of businesses into two listed companies could also be the listing of its electric PV business, wherein it enjoys a dominant market share.” ICICI Securitas has set a target of ₹ 1,000 per share.
While downgrading Tata Motors’ ratings, Emkay Global stated that the recent run-up offers limited upside potential.”We do not envisage major fundamental changes as both businesses were run independently by their respective CEOs since 2021,” said a note by Emkay Global.Nomura said Tata Motors’ PV business has more potential to create value over the next few years. It has seen a turnaround after 2020, with market share ramping up from mid-single digits to 13.5% currently.
HSBC Securities said, in a positive scenario, the demerger could provide a 25% upside from the current stock price over the next 12 months.