- Tata Motors Commercial Vehicle Ltd. received a buy call initiation from UBS
- UBS set a price target of Rs 550, implying 24% upside from current price
- Strong domestic business and improving European trucking volumes support growth
Shares of Tata Motors Commercial Vehicle Ltd. will be in focus heading into trade on Wednesday after the stock received initiation from UBS. The brokerage firm has initiated coverage with a 'buy' call on the counter, citing a strong India business and an impending 'resurgence'.
UBS believes Tata Motors CV is unfettered and accelerating, backed by a strong domestic business that has shown promising signs. Keeping that in mind, the firm has issued a 'buy' call with a price target of Rs 550, which implies an upside of roughly 24% from Tuesday's closing price of Rs 444.
The demerged Tata Motors CV could benefit from improving trucking volumes in Europe, which in turn could support margin expansion and bolster the company's cash flow.
UBS adds that the commercial vehicle space is a more favourable space than the passenger vehicle or the two-wheeler space. Tata Motors, to that end, has emerged as a strong buy for the brokerage firm.
It must be noted that Tata Motors' listed PV arm had posted disappointing sales numbers in Q3, with Jaguar Land Rover sales falling up to 43% due to the impact of a cyberattack.
The CV arm, in comparison, recently launched the Tata E-Truck, the largest range of E trucks between 6 and 15 tonnes. The company launched trucks in four different categories, across 16 different models.
UBS notes that Tata Motors' domestic business has gained from the Medium and Heavy Commercial Vehicles segment. This has enabled margin expansion, which is in line with peer Ashok Leyland. It adds that the company has scope for further margin expansion through improved distribution in the MHCV segment.
Another key growth lever for Tata Motors is Iveco, which will amplify the geographical reach for the automaker. UBS believes the acquisition will be value accretive for the company.
Keeping all these factors in mind, UBS remained firmly bullish on Tata Motors CV, with a reasonable upside of 24% from current levels.
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