Brokerage CLSA has increased the target price of Tata Motors. He has maintained the buy rating for the company. The brokerage has attributed this to the company’s strong volume growth and improving margin outlook. The target price for the company has been increased from Rs 803/share to Rs 841/share. Jaguar Land Rover’s retail volume has seen an increase of 14.1% YoY in October.
Strong demand in JLR volumes
The biggest contributions to this increase have come from Europe (29% increase), Britain (65% increase) and China (6.8% increase). However, North American volumes declined by 13.3% compared to last year. CLSA maintains positive outlook. It expects JLR volumes to continue to improve due to strong demand and good order book.
The brokerage expects wholesale volumes to grow 24% year-on-year to Rs 3.98 lakh in FY24. The brokerage said in a note that incentives per vehicle for Jaguar and Land Rover have seen an increase in the last four months.
Company’s EBIT margin expected to be more than 7%
In June 2023, Jaguar’s vehicle incentive cost was $619 and Land Rover’s was $378. According to CLSA, by October 2023 this figure will increase to $2,569 and $1,680. Although JLR’s US inventory has stagnated, CLSA estimates that the company’s EBIT margin will remain above 7%.
Tata Motors has increased JLR’s EBIT or profit before tax estimate for FY24 to 8% from the initial 6%. The company has set a target of increasing the margin to 10% by FY26. CLSA expects EBIT margins to be between 7-8% for both FY24 and FY25. This is correct for the company as per the upgraded ratings of Moody’s and S&P Global.
