Tata Motors share price target: Which business may make more money, PV or CV?

They might want to be the second-biggest PV player in India by FY25–26. Nomura pointed to recent news stories that said Hyundai Motor India was thinking about an IPO in India.

Tata Motors share price target

Nomura India said on Tuesday that the split of Tata Motors Ltd (TTMT) into businesses that make commercial vehicles (CV) and private vehicles (PV) might not change the Street’s approach to valuation right away. It said this was because India CVs, JLRs, and PVs are well-run and have good reporting.

However, Nomura thinks that in the middle term, the businesses should have more freedom to follow their own plans.

“We think that Tata Motors’ PV business has the most potential to make money over the next few years.” After 2020, it did a great job with its PV business. As of 9MFY24, its market share had grown from the low single digits to 13.5%. We think this is because it focuses on safety, good looks, and cars with lots of features. Nomura India said, “We thought that TTMT might have two models in the top three SUVs in India.”

The outside firm said Tata Motors might want to be the second-biggest PV player in India by FY25–26F. It said that Hyundai Motor India was looking into an IPO in India with a value of $22 to 28 billion. However, it also said that Hyundai has much better profit margins. For now, Nomura India said that Tata Motors should keep its goal price of Rs 1,057.

Tata Motors is also leading the way in Indian efforts to increase the number of electric vehicles (EVs). It currently has a 70%+ market share and aims to offer 10 EV models by FY26. It also wants to get half of its sales from electric vehicles by 2030. “Nomura India said that TTMT could create a lot of value for the company if its plan works out.”

Tata Motors’ PV business has EBITDA margins of 6.5%, but its ICE margins have already gone up to 9.4% in Q3FY24. The overall margin has gone down because the EV margins were negative in Q3 (-8.2%).

“We think that EV margins will get better over time since most of the losses are caused by the cost of making new products.” The CV business may be re-rated again in the future because it is getting a bigger part of the market and making more money. Nomura India said, “We don’t put any value on the potential upside that comes from success in e-Buses and e-LCVs right now.”

The demerger would happen through the NCLT plan of arrangement, and all current Tata Motors shareholders will have the same number of shares in both companies.

This is the next step that makes sense after the subsidization of the PV and EV businesses earlier in 2022.

The management thinks that PV, EV, and JLR will work together in ways that are mutually beneficial, especially when it comes to EVs, self-driving cars, and vehicle software. It said that the accepted demerger would have many benefits, such as better customer service, more job opportunities, and higher value for shareholders.

The official company filing says that the NCLT plan of arrangement for the demerger will be put to the TTMT Board of Directors for approval in the coming months. It will also need to be approved by shareholders, creditors, and the regulatory authority. It should take between 12 and 15 months to finish.

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