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Tata Motors Still a Buy After Chip Shortage: Brokerages – India

By Aditya Raghunath — Tata Motors Ltd (NS:) shares fell 8.52% yesterday after the company said it is facing a chip shortage that could impact sales of its Jaguar Land Rover (JLR) units by up to 50%.

Tata Motors shares have moved up 194% in one year. The stock closed at Rs 108 on July 13, 2020. It closed today at Rs 317.25. Does this mean Tata Motors has run out of juice for a while?

No, say brokerages. Motilal Oswal Financial Services Ltd (NS:) has a target of Rs 400 on the stock in a year’s time with a buy recommendation. It says that the Indian commercial vehicle business will see a cyclical recovery while the passenger vehicle business is in a structural recovery and JLR will also recover cyclically.

ICICI Direct has reduced its price target from Rs 400 to Rs 375 after JLR’s chip shortage news but maintains a buy rating on the stock. It says, “We retain our positive stance on TML for the medium to long term given its intent to reduce automotive net debt to near zero levels (from ~ Rs 41,000 crore as of FY21), alertness to global automotive mega change of electrification (Jaguar to be all-electric by 2025, Land Rover to introduce 6 BEVs in the next five years; EV leader in India 4-W currently via Nexon) and focus on sustainable FCF generation, going forward.”