Emkay Global Financial Upgrades Tata Motors to 'Buy', Targets Price at Rs 600
Tata Motors Continues Growth Amidst Challenges
Tata Motors' commercial vehicle segment, TMCV, reported a fourth quarter (Q4) performance in line with expectations, with revenue growth of 22% year-over-year (YoY) driven by a 6% quarter-over-quarter (QoQ) rise in average selling price (ASP) and a 19% YoY growth in volume. The strong volume growth in medium and heavy commercial vehicles (MHCVs) led this increase, with a 25% YoY growth in the segment.
The company's Q4 earnings before interest, taxes, depreciation, amortization, and margin (EBITDAM) came in at 13.5%, which is in line with consensus estimates. However, the management highlighted commodity inflation as a near-term headwind, with a ~100bps impact already seen in Q4 and a higher impact expected in Q1FY27. In response to this, TMCV took a ~2% price hike in April 2026 but chose not to pass on the full commodity hikes to maintain demand. Instead, the company is focusing on cost control measures to protect margins.
TMCV's Growth Outlook
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For Q1FY27, TMCV has guided for a mid-high single-digit growth outlook, but no specific guidance was shared for the fiscal year 2027. Considering the macro-led uncertainties, including potential diesel hikes and commodity pressures, and TMCV's cautious stance on commercial vehicle demand outlook in FY27, the company's earnings per share (EPS) estimates for FY27 and FY28 were cut by ~6% and ~4%, respectively.
Recommendations
Given TMCV's weak growth and margin stance, the target multiple was reduced to 14x FY28 EV/EBITDA from 16x. Despite this, the company still prefers 2-wheelers and commercial vehicles over passenger vehicles, driven by durable replacement-led demand cycle. The recommendation to buy TMCV remains unchanged, with a target price of Rs600, down ~14% from Rs700.
| Parameter | Q3FY26 | Q4FY25 | Q4FY26 |
|---|---|---|---|
| EBITDAM (%) | 12.8% | 12.2% | 13.5% |
| Revenue Growth (YoY) | - | - | 22% |
| Volume Growth (YoY) | - | - | 19% |
| ASP Growth (QoQ) | - | - | 6% |
| MHCV Volume Growth (YoY) | - | - | 25% |
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Investor Takeaway
Investors should consider upgrading their position in Tata Motors to 'Buy' with a target price of Rs 600.
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