Whalesbook
Nomura Initiates Coverage on Tata Motors Commercial Vehicles
Japanese brokerage Nomura has launched its coverage on Tata Motors Commercial Vehicles (TMCV) by issuing a 'Buy' rating and setting a price target of ₹481. This valuation implies an anticipated upside of nearly 20% from current trading levels, driven by strengthening fundamentals within India's commercial vehicle (CV) sector and an anticipated market upcycle. The recent demerger of Tata Motors' CV business positions TMCV to potentially capitalize on these evolving market dynamics.
TMCV Poised to Benefit from MHCV Market Recovery
Nomura forecasts that TMCV's domestic operations are well-positioned to benefit from a projected recovery in the medium and heavy commercial vehicle (MHCV) segment. This outlook is supported by TMCV's significant 46% market share in the domestic MHCV segment as of FY25. The brokerage anticipates MHCV volume growth of 10% year-on-year for both FY26 and FY27, followed by 5% growth in FY28. Nomura expects EBITDA margins for TMCV to expand to the 12-13% range between FY26 and FY28, fueled by improved operating leverage, stable commodity prices, and reduced discounting.
Iveco Acquisition: Strategic Value Amidst Near-Term Challenges
The €3.8 billion acquisition of Iveco's truck business by TMCV presents a strategic long-term opportunity, though it occurs during a current downcycle for Iveco, with growth recovery anticipated from FY27 onwards. Nomura believes this acquisition offers potential synergies across supply chains, product development, and market access. In its valuation, Nomura has assigned a 12x EV/EBITDA multiple to TMCV's CV business and a 4x EV/EBIT multiple to Iveco, reflecting its current lower margins and scale relative to global peers.
India CV Market Dynamics Support Sector Growth
Nomura's positive sector view is anchored in an improving outlook for the Indian MHCV industry, which is forecast to grow by 8% in FY26 and 10% in FY27, a notable acceleration from recent modest growth rates. Factors contributing to this optimism include rising freight rates that enhance fleet operator profitability, the potential for GST reductions to boost affordability, and a significant replacement demand driven by an average truck fleet age of approximately 10 years in India, exceeding the typical seven-year replacement cycle. Early indicators of this recovery are already visible, with domestic MHCV volumes showing a sharp year-on-year increase in November 2025.
Peer Comparison: Ashok Leyland Remains Preferred Play
Nomura has reiterated its preference for Ashok Leyland as a pure-play proxy for the domestic CV upcycle, maintaining a 'Buy' rating with a price target of ₹196. The brokerage highlights Ashok Leyland's 31% MHCV market share and forecasts its MHCV volumes to grow by approximately 10% annually over FY26-FY28, supported by stronger export momentum. EBITDA margins for Ashok Leyland are projected to expand into the mid-teens, driven by stable input costs, lower incentives, and operating leverage, supporting an estimated 18% earnings CAGR over the same period.
Market Context
As of January 22, 2026, Tata Motors stock was trading around ₹405, suggesting a potential upside towards Nomura's target price of ₹481. Ashok Leyland was trading around ₹165, also indicating potential upside to its target of ₹196.