CLSA downgrades Tata Motors to ‘outperform’ but sees 11% upside potential

A sharp rally in the counter prompted the downgrade but CLSA remains bullish on Tata Motors’ growth prospects.

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Global broking firm CLSA downgraded the shares of Tata Motors to ‘outperform’ from ‘buy’, citing the recent sharp run-up in stock price. The firm remains largely bullish on the automaker’s growth prospects and hence assigned a price target of Rs 1,061 for the stock, sensing a near 11 percent upside potential.

Shares of Tata Motors surged over 18 percent in the past month, having scaled greater highs in the period. The strong momentum for the stock is triggered by expectations of strong growth and its robust quarterly performance.

The firm was impressed by the robust volume growth put up by the Tata Motors luxury arm. Jaguar Land Rover posted a 14.5 percent on-year growth in retail volumes in January, whereas CLSA noted that its volumes in Q4 are tracking higher than that seen in Q3.

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Going ahead, CLSA sees JLR’s UK, European Union and China volumes rising 43 percent, 12 percent and 38 percent on-year, respectively. The firm also noted that discounts on Jaguar increased whereas those on Land Rover have declined in January.

CLSA is also positive about the decline in net debt levels for JLR by £675 million and forecasts the company to turn net cash by FY25.

On February 28, shares of Tata Motors settled marginally lower at Rs 958.05 on the NSE.

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