HSBC has upgraded Tata Motors Ltd. to a “buy” rating from “hold,” despite lowering its target price to Rs 840 from Rs 930. This new target still suggests a potential upside of 29% from current levels. The upgrade is driven by the belief that the stock is undervalued after facing a de-rating in recent months. Jaguar Land Rover (JLR), Tata Motors’ luxury car division, is trading at 1.8 times its estimated EV/EBITDA for FY26, which is at the lower end of its historical range. HSBC sees room for a valuation rebound.
The brokerage also expects Tata Motors’ profit margins to improve due to reduced discounts and warranty costs at JLR, along with a recovery in the Small Commercial Vehicles (SCV) segment. The company’s re-rating could be fueled further if JLR meets its financial targets for the March quarter. Additionally, new vehicle launches in the Passenger Vehicles segment could boost Tata Motors’ market position. After a sharp 48% drop from its July 2024 peak of Rs 1,179 to a 52-week low of Rs 606.3, the stock might get a boost as the company’s board plans to discuss raising Rs 2,000 crore via Non-Convertible Debentures (NCDs) on March 19.
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