Tata Motors share price doubles in 2023; is the stock still buy-worthy?

Tata Motors share price opened at ₹755 against the previous close of ₹753.90 and jumped 6.5 per cent to hit its fresh 52-week high of ₹802.90 on the NSE in an otherwise weak market. With this, the stock’s year-to-date gain surged to 107 per cent.

Despite these sharp gains, the stock remains an attractive buy for the medium to long term as experts expected its JLR (Jaguar Land Rover) segment to do well in the remainder of the financial year, declining debt and improving EBITDA margin in the passenger vehicle (PV) segment.

Brokerage firm Sharekhan by BNP Paribas is positive about the stock. It has a buy call on the stock with a target price of ₹840.

“We reiterate our buy rating on Tata Motors as – (1) JLR is expected to perform better in the second half of the financial year 2024 (H2FY24) versus H1FY24, (2) net automotive debt has been consistently declining, (3) EBITDA margin in the domestic passenger vehicle (PV) segment has been improving, and (4) sustaining EBITDA margin in domestic commercial vehicle (CV) space,” said Sharekhan.

The brokerage firm pointed out that strong festive sales have supported its retail volumes in the PV segment while it expects the domestic CV and PV businesses to perform better in Q4FY24 as compared to Q3FY24.

Moreover, Sharekhan believes the expected price hike from January 2024 in the domestic CV segment (up to 3 per cent) would help the company sustain a high-margin trajectory.

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The long-term growth story of Tata Motors looks bright as the company has established itself in the EVs and is building up its strength in the hydrogen space.

“The company is continuing to build its strength for future growth as its multiple endeavours in the hydrogen fuel segment augur well. While the adoption of hydrogen fuel technology is at its nascent stage, Tata Motors has been taking baby steps in the right direction,” said Sharekhan.

“We build up a hypothesis that the mass adoption of hydrogen fuel technology would be faster in CV space than that of EVs if hydrogen fuel technology is supported by the mass availability of hydrogen fuel along with favourable TCO (total cost of ownership) on assuming that the shift from CNG to hydrogen would be smoother and cost-effective in CV space,” Sharekhan said.

“We remain optimistic on JLR business for H2FY24 and expect the margin improvement trajectory would be maintained in CV and PV business. With an improvement in cash flow, we expect the net automotive debt to come down in the coming quarters, given net automotive debt has already come down from ₹41,700 crore in Q1FY24 to ₹38,700 crore in Q2FY24,” said the brokerage firm.

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While the fundamentals of the stock support a positive view on it for the medium to long term, some technical analysts believe some profit booking at this juncture may be a good move.

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers underscored that the year 2023 has been a one-sided bull run for Tata Motors since it gave over 100 per cent return after hitting the low of ₹399 in December 2022.

“At the current juncture, ₹800 would be stiff resistance since there are clusters of Fibonacci ratios near ₹800 levels (refer to the chart below). So, investors and traders are advised to book partial profits in the range of ₹790–800 zone and wait for meaningful corrections until ₹750 levels for re-entry,” said Patel.

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Shiju Koothupalakkal, a technical research analyst at Prabhudas Lilladher observed that the stock, after the clear breakout above ₹735, has once again maintained the strong uptrend with the next target visible at ₹820 and thereafter with strength sustaining can achieve the ₹880 level. The near-term support is at ₹760.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 29 Dec 2023, 12:19 PM IST