Tata Motors was downgraded back to its “outperform” rating and its price target was cut by 18% to ₹765 from ₹930 earlier. The revised price target implies a potential upside of 17% from Thursday’s closing.
The removal from the high conviction outperform list comes in just
under two months of the stock being included in the list.
CLSA wrote in its note that the imposition of 25% import tariffs in the US along with the discontinuation of the Jaguar models will result in Jaguar Land Rover (JLR) volumes declining by 14% year-on-year in financial year 2026.
As a result, Tata Motors may see its EBIT margins come down to 7% in financial year 2026-2027, compared to the 9% anticipated this year, due to lower scale.
Therefore, CLSA has cut JLR’s Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) estimate for financial year 2026, although it expects it to remain free cash flow positive in both financial year 2026 and 2027.
CLSA has also reduced JLR’s target Enterprise Value-to-EBITDA multiple from 2.5x to 2x due to near-term growth challenges, which it believes are already priced in, as at the current market price, JLR is trading at 1.1 times EV/EBITDA.
With India’s commercial vehicle cycle set to make a bottom in financial year 2026, the brokerage has rolled over Tata Motors’ India CV business valuation by a year to financial year 2028, which could potentially add ₹127 per share to its price.
“This would further cushion the valuation against demand elasticity risks for JLR in the US due to tariffs,” CLSA wrote in its note.
Out of the 34 analysts that have coverage on Tata Motors, 21 of them have a “buy” rating, eight have a “hold”, while five have a “sell” rating.
Shares of Tata Motors ended 2.4% lower on Thursday at ₹655.55 and are heading back towards their 52-week low.
