Multibagger stock: Over 470% return in 5 years! Is Tata Motors still a 'buy'?

Multibagger stock: Over 470% return in 5 years! Is Tata Motors still a ‘buy’?

Shares of Tata Motors Ltd are on a roll and have delivered over 110 per cent return in the last 12 months. That said, the multibagger stock has also rallied over 470 per cent return in the last 5 years. Tata Motors’ share price doubled in 2023, making it the only stock in the Nifty 50 index to achieve this feat.

Recently, the Tata Group company also reported a stellar set of numbers for the quarter ended December 2023. It reported a 137 per cent rise in net profit for the quarter ended December 2023 at Rs 7,025 crore (attributable to shareholders) as against a net profit of Rs 2,958 crore in the year-ago quarter.

Tata Motors’ total revenue rose 25 per cent to Rs 1,10,577 crore in the third quarter of FY24 as against Rs 88,488 crore in the corresponding period of the preceding fiscal.

According to Motilal Oswal Securities, five Nifty constituents, including two Tata group companies namely Tata Steel Ltd and Tata Motors Ltd, contributed 56 per cent of the incremental growth in Q3 earnings.

“Domestic cyclicals such as autos and financials, along with global cyclicals such as metals and oil & gas companies drove the beat,” the brokerage firm said.

Is Tata Motors still buy-worthy?

From hovering around Rs 280 in February 2014, the multibaggar stock is now trading at around Rs 930 levels. So, as an investor, you must be wondering what’s next for this Tata Group stock.

According to Osho Krishan, Sr. Analyst – Technical & Derivative Research, Angel One, Tata Motors has seen a spectacular move in the current financial year and has rallied over 2X to get placed in uncharted territory. Technically, there has been no looking back since its breakout from the 500 zone.

“The rally has been nimble and vertical, and after such a surge, the possibility of some cool-off/profit booking should not be ruled out. On the level front, the 900 zone should be seen as a cushion for any blip, while the sacrosanct support lies around the 845 zone. On the higher end, the stock seems poised to re-test 950, and sustenance could even drive it toward the 4-digit mark in the comparable period. For now, a pragmatic approach with bullish biases is required in the counter,” Krishan added.

Nomura India estimates Tata Motors to move from net debt of Rs 29,200 crore (Rs 79 per share) in the third quarter to net cash of Rs 10 per share in FY25 and Rs 74 per share in FY26. “Further re-rating of JLR will depend on the success of its new EV models,” it said.

Motilal Oswal believes that the next leg of growth will be driven by JLR. Tata Motors should witness a healthy recovery as supply-side issues ebb for JLR and commodity headwinds stabilise for the India business.

“While the India CV and PV businesses would see some moderation in growth in FY25E, the focus shifts to margin expansion-led earnings growth, which is likely to sustain,” the domestic brokerage said while suggesting a target of Rs 1,000.

JM Financial has suggested a target price of Rs 1,000 on the stock and believes a strong free cash flow (FCF) generation is expected to support investments towards electrification at JLR and the company is on track to reduce net debt to £1 billion by FY24 end and turn net cash by FY25.

It noted that Tata Motor’s EV portfolio is leading the domestic EV space. CV demand is expected to remain muted in the near term. However, improving margins for both domestic CV and PV segments augurs well for overall profitability.

Prabhudas Lilladher has maintained a target price of Rs 1,010 on the Tata Group company stock. The brokerage firm said Tata Motors benefitted from volume ramp-up, good order book and a rich mix of higher ASP models. Lower CV discounts also helped margins in the third quarter.

(Disclaimer: Business Today provides stock market news for informational purposes only and that should not be construed as investment advice. Readers are encouraged to consult a qualified financial advisor before making investment decisions.)

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