Tata Motors is making waves in the stock market with its ambitious plans for the electric vehicle (EV) sector and its recent financial achievements. The company, a leader in India’s EV market, has seen its shares rally 6% over the past week, climbing 2.3% to Rs 1,010 in early trade on June 12.
This marks Tata Motors’ fifth consecutive session of gains, fueled by bullish sentiments from brokerages and strong growth projections.
EV sales soar: A closer look at the numbers
India’s EV market is booming, and Tata Motors is at the forefront. According to JMK Research & Analytics, EV sales in India soared by 40.31% in FY2024, reaching 1,752,406 units.
Electric two-wheelers (E2Ws) and electric three-wheelers (E3Ws) were the primary drivers, accounting for 94% of total EV sales. The E2W segment led the charge with 1,009,356 units sold, reflecting a 29% year-on-year growth and capturing 57.60% of the market.
Electric three-wheelers saw an even more impressive 56% year-on-year growth, with sales reaching 634,969 units. The electric car (E-Car) category also experienced significant growth, with sales up by 82% to 99,085 units. Electric buses (E-Buses) topped the growth charts with an 85% increase, though their market penetration remains modest.
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Analyst views: Bullish sentiments
Brokerages are optimistic about Tata Motors’ future. Jefferies has issued a buy call with a target price of Rs 1,250 per share, praising the company’s focus on brand strengthening and profitability improvements across passenger vehicles (PVs) and commercial vehicles (CVs).
Tata Motors aims to increase its market share in PVs to 16% by FY27 and to 18-20% by FY30. Additionally, the company targets a double-digit EBITDA margin in its CV and PV (Internal Combustion Engine) segments and aims to break even in its EV segment by FY26.
Morgan Stanley has assigned an equal-weight rating with a target price of Rs 1,100 per share. They note that Tata Motors’ individual business units are now self-sustaining, paving the way for potential demergers.
The supportive macroeconomic environment is expected to sustain the commercial vehicles business cycle, and the ICE segment is projected to generate positive free cash flow in the medium term.
Financial stability: Tata Motors goes debt-free
A significant milestone for Tata Motors is achieving net debt-free status in FY24. This financial stability bolsters investor confidence and underscores the company’s robust financial health. The management is confident of maintaining this stability and achieving a market share of over 25% across various segments.
IncCred Equities highlights the impressive return on capital employed (RoCE) of 36% achieved by Tata Motors’ CV division over the past year despite flat volume growth. They believe the demerger process, expected to take about a year, will further strengthen the company’s business units, particularly favouring the CV business post-demerger.
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Future prospects: Ambitious targets and strategic investments
Tata Motors’ future looks promising with its aggressive investment plans for the EV division. The company has announced an investment of Rs 16,000-18,000 crore into its EV segment until FY30. This strategic move aims to capitalise on the growing demand for electric vehicles and position Tata Motors as a dominant player in the EV market.
The introduction of advanced models comparable to ICE vehicles has played a crucial role in boosting EV sales. The management is confident that these investments, coupled with favourable cost economics and increasing demand for last-mile mobility, will drive substantial growth in the EV segment.
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Conclusion
Tata Motors is riding high on its strong growth prospects and financial stability. With ambitious investment plans, impressive EV sales growth, and a bullish outlook from analysts, the company is well-positioned to dominate the Indian EV market.
Investors are optimistic about Tata Motors’ ability to achieve its targets and continue its upward trajectory. As the company moves towards a net debt-free status and continues to innovate in the EV sector, it remains a stock to watch for the future.
