Motilal Oswal has initiated coverage on Tenneco Clean Air India with a target price of Rs 673, supported by a Rs 12,400 crore order book. While the company holds a strong market share in emissions control, investors should evaluate risks such as the long-term shift toward electric vehicles and potential liquidity impacts from private equity exits.
Motilal Oswal has initiated coverage on Tenneco Clean Air India, setting a target price of Rs 673 per share. This target implies a potential upside of approximately 50% from the stock's recent trading level of Rs 448. The brokerage projects the company’s earnings to grow at a compound annual rate of 19% through fiscal year 2029, a trend expected to be supported by strict upcoming emission regulations.
The company specializes in emissions control technology, a segment that remains vital as India prepares for stricter environmental standards. Upcoming regulations, including BS-VII, CAFE III, and TREM-V, are expected to require advanced technology in both passenger and commercial vehicles. The company currently holds a strong market position, with significant shares in the commercial vehicle and off-highway emissions control segments. This positioning allows it to secure long-term relationships with major original equipment manufacturers.
A key financial metric highlighted in the report is the company’s highly capital-efficient business model. It functions with a negative working capital cycle, meaning it collects cash from customers faster than it pays its suppliers. Additionally, its return on capital employed—a measure of how effectively the company generates profit from its invested money—exceeds 90%. The company’s growth is further anchored by a robust order book valued at Rs 12,400 crore, which provides visibility into its future revenue stream.
While the current outlook appears favorable, investors should remain aware of specific structural and operational risks. The most significant long-term challenge is the automotive industry's gradual shift toward electric vehicles, which do not utilize traditional exhaust emissions control systems. Furthermore, the company is backed by private equity investors. If these investors choose to reduce their stake, it could temporarily affect share liquidity in the market. Other potential concerns include the volatility of raw material prices and the risk associated with its technology licensing agreements. Any disruption in these contracts or the loss of a major client could impact future performance.
For investors tracking this stock, the most important developments to watch will be the actual execution and conversion of the Rs 12,400 crore order book into revenue. Additionally, monitoring the timeline for new government emission mandates and any updates from the private equity stakeholders will be crucial for understanding the company's future risk profile.