Nomura India has maintained a ‘Neutral’ rating on Tata Motors Ltd following the effective demerger of its Commercial Vehicle (CV) and Passenger Vehicle (PV, including EV and Jaguar Land Rover) businesses.
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The foreign brokerage has split its post-demerger target price almost evenly between the two entities, assigning Rs 365 per share for the CV business and Rs 367 per share for the PV business. The PV entity comprises Tata Motors’ domestic passenger vehicle operations, the JLR business, stakes in Tata Sons, Tata Steel, Tata Technology, and other investments, while the CV entity includes the domestic commercial vehicle operations, the upcoming Iveco acquisition in 2026, and a stake in Tata Capital.
For the PV business, momentum has picked up following the recent GST reduction, with festive and pent-up demand supporting sales. The trend toward premiumisation remains strong, reflected in a surge of bookings for compact and micro SUVs such as the Punch and Nexon. The recently unveiled Harrier EV has also received an encouraging initial response, with bookings surpassing early expectations. Management is targeting double-digit EBITDA margins in the medium term, up from 3.9 per cent in 1QFY26, driven by a richer product mix, better pricing, and cost efficiencies.
Operations at JLR have begun resuming across facilities following a cyber incident in September. Management noted that demand has not been significantly impacted, and production is expected to pick up in the coming weeks. Nomura expects JLR’s EBIT margins to reach 6.2 per cent in FY26F and 7.6 per cent in FY27F, though management guidance of 5-7 per cent EBIT margin and zero free cash flow in FY26E leaves room for downside risk.
On the CV side, Tata Motors expects the industry to grow 5 per cent in FY26F, implying 10 per cent growth in the second half of the year, supported by the GST reduction. The CV business will include the Iveco acquisition starting April 2026, valued at EUR 3.8 billion and initially financed through debt with 40 per cent equity planned later. Nomura currently does not assume significant value creation from this deal. The company has guided for a 5 per cent revenue CAGR and an expansion of EBIT margins from 5.4 per cent to 7.5 per cent over FY24-28E. Early results from Iveco’s first half of CY25 indicate a 9 per cent decline in revenue year-on-year and EBIT margins excluding Defense of 3.7 per cent, compared with 6.3 per cent in H1CY24.
Overall, Nomura continued to hold a Neutral rating on Tata Motors and will update estimates once pro-forma financials are available. The brokerage also noted that the reduced weight of the stock in indices could pose a technical risk, while the stock currently trades at 4.6 times EV/Ebitda.