CLSA upgrades Tata Motors to 'Buy' rating after JLR wholesales rises in Q3

Global brokerage CLSA, on Tuesday, has upgraded Tata Motors' shares to 'Buy' and raised target price. The global research firm belief that recovery in Jaguar Land Rover’s sales volume, along with improvement in margin profile, will aid the company’s free cash flow in financial year 2023-24 (FY24). Also, the global research firm raised the target price to Rs 512 a share, with an upside of over 23% from the current market price. 

The brokerage firm expects the JLR margin profile to improve led by volume growth, and for commercial vehicles (CV) and passenger vehicles (PV), business margin to improve on lower commodity costs and price hikes. Improvement in volume and margin profile to aid free cash generation in FY24, it added.

Tata Motors said in the filing that its wholesale volumes were 79,591 units in the period (excluding the Chery Jaguar Land Rover China joint venture), up 5.7% compared to Q2FY23, and 15% over Q3FY22 sales.

On the other hand, Morgan Stanley has an 'overweight' rating on the stock with a target of Rs 502 per share with its view that JLR is likely to generate £400 million-plus free cash flow in Q3. 

"The high interest rate environment is a risk to global PV demand. Given low starting point of JLR volumes and depressed EBIT margin we maintain positive view," Morgan Stanley said in the report.

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