The Tata Motors scrip gained 5.06% in intra-day trade on Tuesday with brokerages raising their target price for the stock after the automaker reported a 195% y-o-y rise in its net profit to R4,804.80 crore in Q3.
On Tuesday, the stock opened at R381.25, or 4.73% higher, before closing at R374.30 — a gain of 2.83% or R10.30. Jefferies, JPMorgan, HDFC Securities, Ambit Capital, Goldman Sachs, Axis Capital, Edelweiss, Barclays, Nomura and Credit Suisse have all raised their target price on the stock.
Analysts are of the view that JLR’s global presence makes the stock attractive at current valuations. “Tata Motors trades at 8-times FY15e EPS of R42.8/sh and 4.1-times EV/Ebitda on a consolidated basis, making valuations quite attractive for a global luxury player. Any decline in global luxury demand remains key risk to investment thesis,” said HDFC Securities analyst Sorabh Talwar in a research report.
At the current market price, the stock is trading 8.2% below its life-time high of R405.
“We remain encouraged by the growth prospects at JLR. Further, management’s sustained investments in the local business (despite the downturn) will likely stem market share losses. We increase our FY15/16 earnings estimates by 5-3% and raise our sum-of-the-parts-based Mar-15 price target to R450,” said JPMorgan analysts Aditya Makharia and Arjun A Bhatia in a research note. JPMorgan’s previous target price stood at R445.
Analysts say discounting trends and slow revival of industrial cycle remain key risks to the stock price. The Tata Motors scrip has been subdued in 2014 so far. The stock has shed 0.56% YTD. In 2013, the stock ended with gains of more than 20%.