Tata Motors top stock pick in auto pack, expect 22% returns in a year: Macquarie

NEW DELHI: Turnaround in its Indian commercial vehicle (CV) business and response to new JLR models will be key in boosting sales for global auto giant Tata Motors in the near future, says Macquarie, which expects its earnings to double in the next three years.

The global research firm maintains an 'outperform' rating on the stock with a target price of Rs 700, which translates into an upside of nearly 22 per cent from Thursday's closing price of Rs 573.85 on the Bombay Stock Exchange.

Tata Motors is also Macquarie's Marquee 'Buy' stock, and is also the top pick in the Indian auto sector. “Tata Motors trades at 7.8x FY17E PER. We expect Tata Motors earnings to double in 3 years (FY14-17E),” said the Macquarie note.

Jaguar Land Rover (JLR) reported a 13.8 per cent growth in Feb-15 retail sales in the US. Land Rover sales grew strongly despite supply constraints for key models and lower volumes on account of model changeover of LR2 (Freelander).

Well, the key challenge for Land Rover for growing its sales in the US is availability. They are completely sold out of Range Rover, Range Rover Sport and LR4. There is roughly a six-month waitlist for Range Rover and four months for RR Sport, resulting in an extremely low level of stock.


Analysts expect the global auto giant to continue its outperformance on the JLR front which is the chunk of their business. Emerging geographies like South America, China, Russia etc. are expected to drive the revenues going forward.

"Slurry of new launches, refreshes, variants, face lifts are expected to populate JLR's stable in the coming couple of years. This along with expansion of capacities and JV commissioning in China with Cherry Automobiles will provide the extra boost to the volumes," LKP Research said in a note.

"On the domestic front, the recent green shoots seen in the MHCV segment will yield superior benefits alongside with JLR," added the note.