Tata Motors can be a beneficiary of the way the auto sector demand has strengthened since Kovid 19. The company’s profitability is expected to improve.
Rakesh Jhunjhunwala Portfolio: This year the shares of Tata Motors have seen constant pressure. Despite the improving outlook, the stock has weakened by about 22 percent this year in the correction of the market. It has lost about 27 per cent since its 1-year high. However, brokerage houses are looking very positive about the stock. The brokerage says that there are concerns like shortfall of chip, increase in input cost due to expensive commodity, but the kind of recovery in demand will benefit the company. The company’s debt is reducing, cash flow is better. The company will also get the benefit of recovery in the commercial segment of the auto sector.
Profitability expected to improve
Brokerage house ICICI Securities has included Tata Motors in its top auto pick. The brokerage has given a target of Rs 680 while advising investment in the stock. In terms of current price of Rs 393, 73 percent return is possible. The brokerage says that the auto sector has been an underperformer in several aspects in the last few years. But the way the demand has strengthened since Kovid 19, Tata Motors can be its beneficiary. The company’s profitability is expected to improve. However, chip supply, expensive crude and higher input cost are still a risk.
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improve free cash flow
Brokerage house CLSA has given outperform rating for Tata Motors and has given a target of Rs 453 for the stock. The brokerage house says that the debt of the company is getting reduced. With the improvement in free cash flow, further reduction in debt is anticipated. However, problems related to chip shortage and supply chain are expected to continue in the year 2022 as well. The brokerage has cut JLR and commercial vehicle business volume estimates. But considering the attractive valuation of the stock, the outperform rating has been given.
Rakesh Jhunjhunwala also has stake
Rakesh Jhunjhunwala, a veteran investor in Tata Motors’ stock market, also likes it. According to the shareholding pattern of the March quarter, he has a 1.2 percent stake in this company. His portfolio includes 39,250,000 shares of the company, whose current value is Rs 1560.6 crore.
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
