Tata Motors Shares Slip After CLSA Says 'Sell'

Shares of Tata Motors Ltd. fell the most in intraday trade in two weeks after CLSA downgraded the stock to 'sell', citing an overvalued domestic passenger vehicle business and slower electric vehicle ramp-up by its luxury brand Jaguar Land Rover.

The valuation of about $9.1 billion (about Rs 67,800 crore) ascribed to Tata Motors' passenger vehicle business by a private equity fund is “too high”, the research house said in a Jan. 4 note. “We value it at $5 billion (about Rs 37,200 crore), assuming Tata Motors' market share in domestic PV segment increases from 12% in FY22 to 16% by FY50, and profitability remain elevated till FY50.”

CLSA expects JLR's volumes to grow at an annualised rate of 20% over FY2022-24 compared with its earlier forecast of a mid-teen rise as chip shortage eases. But, it said, “most of this growth in auto volume will likely come from electric vehicles and hybrids and JLR does not have any launches in battery EVs till 2024, which could pose a risk to our volume estimates”.

CLSA downgraded the automaker's stock to ‘sell' from ‘buy', and cut price target to Rs 408 apiece from Rs 450—an implied downside of 15% from the current market price.

Shares of Tata Motors fell as much as 2.8% to Rs 484 apiece in intraday trade. The stock closed 1.6% lower, compared with a 1% rise in benchmark Nifty 50.

Other Highlights From CLSA Report

• Domestic commercial vehicle business will post strong growth over the next three years, and expects the company to gain market share.

• Values its CV business at $9.3 billion versus $5.9 billion for Ashok Leyland.

• Forecasts a sharp reduction in net auto debt at the consolidated level, mainly from JLR operations.

Of the 34 analysts tracking Tata Motors, 25 maintain a ‘buy', five recommend a ‘hold' and four suggest a ‘sell', according to Bloomberg data. The overall consensus 12-month price target implies an upside of 12.4%.