Tata Motors PV: HSBC Cuts Target Price Amid Fears Over JLR Business

HSBC has come out with a cautious note on Tata Motors Passenger Vehicles Ltd, pointing out that all stars appear to be 'misaligned' for the company's Jaguar Land Rover business.

The brokerage firm notably maintained a 'hold' rating on the counter while significantly reducing the target price from Rs 466 to Rs 400 amid fears that strong global challenges for JLR may seriously negate the momentum generated by the domestic business.

In its latest note, HSBC noted that these 'misaligned stars' for Tata JLR may dampen Tata Motors PV's profitability in the coming quarters.

Some of these external challenges for the JLR business include lingering impact of the cyber attack as well as US tariffs.

Weak demand from the European Union and an ageing model portfolio compounded by a luxury tax in China, are also potential factors dampening the outlook for Tata JLR.

As things stand, the headwinds for the JLR outweigh the strength of Tata Motors PV's India operations.

Speaking of the domestic business, though, Tata Motors PV is well placed in the market and is set to benefit from the launch of new models such as Sierra,

The company is also expecting tailwinds from Production-Linked Incentive (PLI) schemes related to the electric vehicle portfolio, especially the Nexon EV and Harrier EV, in the third and fourth quarters, respectively.

However, HSBC pointed out that despite the resilience in the domestic business and undemanding valuations, JLR is unlikely to recover operationally in the medium to long term, thus further weighing on Tata Motors PV's overall business.

Out of 35 analysts tracking the company, nine maintain a 'buy' rating, 15 recommend a 'hold' and 11 suggest 'sell', according to Bloomberg data. The average 12-month consensus price target of Rs 398 implies an upside of 11.2% against Monday's closing price of Rs 357.