Tata Motors shares trade flat; here's what brokerages advise

On Wednesday, the company launched CNG-based variants of its popular cars Tiago and Tigor.

Last month, Rakesh Jhunjhunwala raised his stake in the company by 7 basis points. He had bought a 1.11 percent stake in the company in September, which was raised to 1.18 percent by December-end. Jhunjhunwala has the third-largest holding in the auto major

Macquarie has an 'outperform' call on the stock with a target price of Rs 567. It said that a healthy order book for Jaguar-Land Rover (JLR) lends near-term earnings visibility to the company. An 'outperform' call implies the returns of the stock will be better than average market returns.

The brokerage said it has boosted product offering with the launch of CNG vehicles that will support market share gains for the company.

The company replaced Hyundai to become the second-largest carmaker in December. It reported a 50 percent jump in passenger vehicle sales in December.

In the electric vehicle (EV) space though, Macquarie believes the "company's leadership is in a nascent stage." Tata Motors has reported strong electric vehicle (EV) sales in the first three-quarters of FY22. It has sold over 10,000 units in this fiscal so far, with December numbers reaching as high as 2,255 units – the highest ever monthly sales.

The company has plans to produce at least 50,000 EVs in the next fiscal following funding from the US-based private equity company TPG Capital. As per reports, the auto major intends to ramp up annual production up to 1.5 lakh EVs a year. It also has plans to launch 10 new EVs by 2025. It currently sells two models in India – Nexon EV and Tigor EV.

Brokerage house Jefferies said the company is in the early phase of a multi-year turnaround and that JLR is improving sequentially as chip shortages ease. The company lags peers on EV though it has a new roadmap, it said. In the next 12-18 months, JLR will launch next-gen plug-in hybrid electric vehicles (PHEVs) of RR and RR-Sport, which should provide a boost to the company, the brokerage said.

The company also expects to later have BEVs of the RR and RR-Sport models, a report by Yes Securities said. BEVs are battery electric vehicles that are powered entirely by electricity.

Jaguar's electric vehicle only shift will "potentially improve a weak franchise," the Yes Securities report said. Based on its improving India franchise, early leadership in EVs in India and JLR's focus returning to the higher-margin Land Rover brand, the brokerage is positive on Tata Motors.

It is also in the favour of the company's recent deal with TPG, saying it provides "additional headroom on India EV capabilities" adding that it is a "formidable play among OEMs". The brokerage has a 'buy' call on the stock with a target price of Rs 566.

"An early lead in the India EVs offers big option value" for the company, Jefferies said. Tata Motors is the top auto pick for the brokerage, with a target price of Rs 625.

CLSA, however, advises selling the stock at a target price of Rs 408, saying that JLR does not plan to launch BEVs before 2024 and that shift to BEVs is a threat to JLR's market share.

It argued that the sale of PHEVs and BEVs rose significantly in 2021 in major automotive markets. But JLR's share in the BEV+PHEV market is less than 1 percent in US and China and around 2 percent in Europe.