Tata Motors shares jump 6% after strong Q1; Nomura upgrades stock, CLSA retains Outperform rating

Shares of commercial vehicle major Tata Motors rallied as much as 6% to their day’s high of Rs 485 on the BSE on Thursday after it reported a net profit of Rs 2,560 crore in the first quarter of FY27, a jump of 83.3% from Rs 1,397 crore reported in the same period last year.

Tata Motors said that the increase in net profit was led by a mark-to-market gain on investments in Tata Capital.

The company’s revenue from operations came in at Rs 20,667 crore, up 19% from Rs 17,324 crore in the corresponding quarter of the previous financial year, the Tata Group company said post-market hours.

For the quarter under review, the company’s EBITDA rose to Rs 2,300 crore, up 10% year-on-year, while the EBITDA margin stood at 10.9%, down 90 basis points. The drop in margins comes on the back of a 13% year-on-year increase in total expenses.

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What are experts saying?

Nomura has upgraded Tata Motors to Buy from Neutral and assigned a target price of to Rs 554 from Rs 402, implying an upside of 21% from current levels. Nomura expects TMCV to benefit from its focus on EVs and a strong export orderbook.

The 2.5% price hike taken in July should also support margin improvement. IVECO’s better 2QCY26 performance provides further comfort, while Nomura sees strong potential for IVECO to improve margins over the next 2-3 years through sourcing from low-cost countries, posing a potential upside risk to its estimates.CLSA has an Outperform rating on Tata Motors CV with a target price of Rs 596 (30% upside). The brokerage said TMCV’s Q1 EBITDA margin of 11.3%, down 76 bps YoY, was around 50 bps above consensus. TMCV attributed most of the margin decline to commodity inflation, which had a negative impact of 340 bps YoY, partly offset by operating leverage and price hikes, which contributed 140 bps positively.

While commodity costs remain inflationary, TMCV expects the impact to be mitigated through price actions, including the 2.5% price hike taken in July, along with ongoing cost reduction measures. On demand, TMCV said underlying momentum remains healthy and expects CV industry demand to remain robust, with 2QFY27 volumes likely to post double-digit growth.

Motilal Oswal has maintained a Neutral rating on Tata Motors with a target price of Rs 434, implying a downside of 5%. Following the better-than-expected Q1 performance, the brokerage has raised its earnings estimates by 6% for FY27 and 2% for FY28.

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It now expects TMCV to deliver a CAGR of 12% in revenue, 10% in EBITDA and 12% in PAT over FY26-28E. At 23.5x FY27E and 20x FY28E EPS, the stock appears fairly valued, according to the brokerage. Motilal Oswal values the core business at 12x FY28E EV/EBITDA, in line with peers, and assigns Rs 15 per share to Tata Motors’ stake in Tata Capital.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)