Tata Motors Eyes Rebound Near ₹650: Analyst Flags Accumulation
Tata Motors, one of India’s leading automakers, has been facing a challenging period in recent months. The company’s shares have corrected significantly from their high of ₹713.85, amid concerns over the margins of its luxury vehicle arm, Jaguar Land Rover (JLR). However, one analyst, Deepak Pal, believes that the stock has reached a critical juncture, offering an attractive accumulation opportunity near ₹640-650. In this blog post, we’ll explore the analyst’s view and examine the factors supporting a potential rebound in Tata Motors’ shares.
The Concerns
Tata Motors’ stock has been under pressure since the start of the year, primarily due to concerns over JLR’s profitability. The luxury vehicle segment has been facing intense competition, and JLR’s efforts to revamp its product lineup and operational efficiency have been slow to bear fruit. As a result, the company’s margins have come under pressure, leading to a decline in its share price.
In recent months, JLR’s revenue has been impacted by various factors, including the semiconductor shortage, COVID-19-related lockdowns, and increased competition from other luxury brands. The company’s operating profit margin has also been squeezed, partly due to the rise in raw material costs and increased investments in new products and technologies.
The Bull Case
Despite the short-term challenges, Deepak Pal, an analyst at Emkay Global Financial Services, believes that Tata Motors has significant potential for growth in the long term. In a recent note, Pal highlighted several factors that justify a bullish view on the stock, including:
- Strong FY25 Earnings: Pal expects Tata Motors to deliver strong earnings growth in FY25, driven by improved operational efficiency, cost reductions, and a more competitive product lineup.
- EV Growth: The analyst believes that Tata Motors is well-positioned to benefit from the growing demand for electric vehicles (EVs). The company has a strong portfolio of EV products, and its partnership with Tesla is expected to drive growth in this segment.
- Business Demerger: Tata Motors is planning to demerge its passenger vehicle business from its commercial vehicle business, which will help to unlock value for shareholders.
Pal has set a target price of ₹725 for Tata Motors, implying a potential upside of around 12% from the current level. The analyst believes that the stock has the potential to rebound towards this target if support levels hold.
Support Levels
Tata Motors’ shares have been trading in a narrow range between ₹620 and ₹650 in recent weeks. Pal believes that the stock has the potential to rebound towards ₹720-725 if support levels hold. The analyst has identified the following key support levels:
- ₹640-650: This level represents a critical accumulation zone, and Pal believes that the stock is likely to find support here.
- ₹620: This level represents a short-term support zone, and a breach below this level could lead to a further decline in the stock price.
Conclusion
Tata Motors has corrected significantly from its high amid concerns over JLR’s profitability. However, one analyst, Deepak Pal, believes that the stock has reached a critical juncture, offering an attractive accumulation opportunity near ₹640-650. The company’s strong FY25 earnings prospects, EV growth, and planned business demerger support a long-term bullish view. A rebound towards ₹720-725 is likely if support levels hold.
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