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Tata Motors Shares Get a Boost After Steep Decline: DAM Capital Upgrades Rating with ₹870 Target

Quick Summary
  • Tata Motors shares have been upgraded to “buy” by DAM Capital, citing an 18% upside with a target price of ₹870.
  • The brokerage expects a recovery in the auto sector by FY26 and projects 6.5% CAGR growth in Jaguar Land Rover volumes over FY25-FY27.
  • Near-term challenges persist, but Tata Motors remains a strong long-term investment opportunity.
Tata Motors share upgrade
source - Google

Tata Motors Ltd., a leading manufacturer of passenger and commercial vehicles, has received a significant upgrade from brokerage firm DAM Capital. Following a steep 37% drop from its recent peak of ₹1,170, the brokerage has shifted its rating from “neutral” to “buy,” citing a favorable risk-reward profile and long-term growth prospects.

Upgrade Details and Price Target

DAM Capital has priced Tata Motors at ₹870indicating upside of 18% from Thursdays closing price of ₹741.5. Though the target is sharply below the peak, the firm believes that levels are now very attractive for investors, especially long-term ones.

Auto Sector Recovery in Sight

The upgrade is premised on expected recovery in the automobile sector andin that aspect, shall be on pace by FY 2026. These are likely to be prompted by positive macro-economic conditions with improvement in overall dynamics in the industry.

Diamon CAPITAL has upgraded shares of Escorts Kubota and Bajaj Auto, saying that optimism remains for the sector-wide revival. The brokerage, however, concedes that the headwinds are likely to prevail in the near term, at least for the next 1-2 quarters; normalcy is likely to return from mid-FY26 to FY27.

Jaguar Land Rover: The Growth Driver

One of the primary reasons to be optimistic about Tata Motors is the long-term growth potential of the luxury arm, Jaguar Land Rover (JLR). The DAM Capital believes JLR volumes are going to be growing at a CAGR of 6.5% between FY25 and FY27. Of course, the margin and valuation multiples for the CV, PV, and the JLR segments are just a tad low and have factored into the analysis; the long-term growth trajectory is promising.

Bear Case and Market Sentiment

Despite the optimistic forecastthe brokerage has taken downside risks into account. In the bear case, the brokerage has assigned a price target of ₹675, marking an expected decline of 9% from the current levels.
Mixed market sentiment prevailsOf the 36 analysts covering Tata Motors, 22 have a “buy” rating, nine for “hold,” and five have a “sell” rating.

Recent Performance and Market Trends

Tata Motors shares closed 0.7% higher Thursday at ₹741.5. It has had an off year so far in 2024down 5%, but finished 2023 on an incredible roll with the stock ending as the Nifty 50‘s best performer, and the only index stock to double during the calendar year.

Why It Is Important for Investors

The current valuation of Tata Motors presents an interesting opportunity for investorsA diversified portfolio, combined with expected growth in JLR volumes and a recovering auto industry, may unlock significant value over the medium term. However, near-term volatility and sector-wide challenges remain key considerations.

The upgrading done by DAM Capital adds yet another layer of optimism but would be at the long term as Tata Motors navigates through short-term headwinds and gets ready to see a sector-wide recovery. A promising outlook for JLR and the wider auto space ensures Tata Motors makes headlines in the years to come once more.

For those seeking strategic entry, this current downtrend in the stock price of Tata Motors may be an opportunity to enter since it has an upside of 18% based on the latest analysis by DAM Capital.

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