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Motilal Oswal has issued a research report on Tata Motors' demerged commercial vehicle (CV) business, rating it 'Neutral' with a target price of INR 341. The report notes that while the 2QFY26 operating margin was in line at 12.4%, a significant concern is the gradual loss of market share in key segments, particularly Light Commercial Vehicle (LCV) goods, which has dropped from 40% in FY22 to 27%. With no immediate triggers, the outlook is cautious.
Motilal Oswal's recent research report focuses on Tata Motors' demerged Commercial Vehicle (CV) business, marking the first time financials for this entity have been reported with restated prior-year data, making direct comparison difficult. The report indicates that the operating margin for the second quarter of FY26 was 12.4%, which was in line with the brokerage's estimates.
A primary concern highlighted by Motilal Oswal is the consistent loss of market share for Tata Motors across its key CV segments. This is particularly evident in the Light Commercial Vehicle (LCV) goods category, where the company's market share has declined from a high of 40% in FY22 to the current 27%. The report notes that the gap between Tata Motors and the current market leader, referred to as 'MM' in the source text, is widening annually.
Given the absence of any clear and immediate triggers that could boost performance, Motilal Oswal has assigned a 'Neutral' rating to Tata Motors' CV business. The firm has set a target price of INR 341 per share. This valuation is derived by applying a multiple of 11 times the estimated Earnings Per Share (EPS) for September 2027 to the core CV business, a valuation method aligned with industry peers. Additionally, INR 12 per share has been added to account for Tata Motors' stake in Tata Capital.
Impact
7/10.
This report can influence investor sentiment towards Tata Motors' commercial vehicle division, potentially affecting its stock price if the market perceives the market share loss as a significant long-term challenge. Investors will closely watch for strategies implemented by Tata Motors to regain market share and address competitive pressures.
Difficult Terms
Demerged entity: A business unit that has been separated from its parent company to operate independently.
Operating margin: A measure of profitability that shows how much profit a company makes from its core business operations after deducting operating expenses.
Market share: The percentage of total sales in an industry generated by a particular company.
LCV goods: Light Commercial Vehicle (LCV) refers to smaller trucks and vans used for transporting goods.
EPS: Earnings Per Share, a company's profit divided by the number of outstanding shares.
Valued at 11x Sep’27E EPS: The company's core business is valued by multiplying its estimated earnings per share for September 2027 by 11.
Peers: Similar companies in the same industry.
Triggers: Events or factors that are expected to cause a significant change or reaction.
MM: The source text mentions 'MM' as the current market leader, likely an abbreviation or typo for a competitor.
