Tata Motors Commercial Vehicles Ltd. has received a favourable call from HSBC, which has upgraded its target price on the counter while retaining a buy call. The firm noted TMCV's favourable position within the industry, which itself has witnessed strong momentum.
In its latest note, HSBC added that things are looking up for Tata Motors CV, especially amid an improving backdrop in the medium and heavy commercial market. Capacity additions by small fleet operators and replacement demand from large transporters have spurred growth in the sector.
This is in addition to the impact of the Goods and Services Tax reduction that has fueled third-quarter volume growth for the company. HSBC further noted that a significant share of older trucks remains in the market, thus signalling sustained replacement demand.
A key growth lever for the company could be the Iveco acquisition, which is expected to close in the first quarter of FY27. HSBC lists Iveco as a factor that could provide an upside risk to volume and margin estimates, adding that Iveco's performance is less cyclical and volatile.
Iveco has consistently outpaced industry growth in its key European and South American markets in the past five years. The firm, therefore, expects the integration to contribute up to Rs 7 to earnings per share, potentially adding between Rs 40 to Rs 70 to TMCV's overall stock price.
Moreover, HSBC believes Tata Motors' CV valuation is much more favourable compared to Ashok Leyland and other peers, adding to the positive outlook.
Keeping these factors in mind, HSBC has maintained a 'buy' call on Tata Motors CV while increasing the target price from Rs 490 to Rs 534. This implies an 11% upside from the stock's last closing price of Rs 479.
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