Global brokerage firm CLSA downgrades auto major Tata Motors From buy to sell rating. The downgrade is based on lower valuations for its domestic passenger vehicle (PV) business, lower than the recent valuation by a private equity fund, and lower valuations due to Jaguar Land Rover’s (JLR) slower electric vehicle. EV) ramp-up versus competitor.
CLSA lowers its target on auto stocks 408 per share. From 450 first because it differs from the road on the valuation of Tata Motors’ domestic PV business.
In October 2021, Tata Motors said it would raise $1 billion ( 7,500 crore) traded in its passenger electric vehicle (EV) business from TPG Rise Climate at a valuation of up to $9.1 billion. According to the company, the fund will be used by a new subsidiary of the company to partially fund an investment of $2 billion over the next five years to expand its EV business, which includes launching 10 EV models.
“We believe that the $9.1 billion valuation by a private equity fund for Tata Motors’ EV business is too high. We consider Tata Motors’ PV business to be $5 billion, assuming that Tata is the dominant player in the domestic PV segment. The market share of Motors has grown from 12% in FY22 to 16% by FY50, and the profitability has grown by FY50,” the note said.
However, CLSA believes that the auto maker’s domestic CV business will register strong growth in the next three years and the company expects to gain market share.
The brokerage said, “Tata Motors has committed to restrict investment in JLR, and given our view that profitability at JLR will improve, we anticipate a sharp reduction in our net auto loans at a consolidated level, Mainly from the operations of JLR.”
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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