Tata Motors Commercial Vehicles Analyzed

Key Points

• “Buy” rating assigned by ICICI Direct.
• Stock valued at ₹500 based on a new approach.
• Focus on India’s growing commercial vehicle market.
• Strong margins: EBITDA 12.2%, EBIT 9.8%, ROCE 45%.
• Market leader in MHCVs with 49% retail share.
• Iveco acquisition expected to expand global offerings.

Tata Motors Commercial Vehicles: A Closer Look

ICICI Direct has given Tata Motors Commercial Vehicles (TMCV) a “Buy” rating, meaning they think the stock will likely go up in value. They’ve calculated a value of ₹500 for the company, using a new method called “sum-of-the-parts.” This means they’re looking at all the different parts of the business and adding them up to get a total value.

They believe TMCV is a good bet because it’s focused on India’s commercial vehicle market. This is helpful because after Tata Motors split off its truck business, TMCV is now its own company. This means investors can directly see how well the trucks are doing without worrying about the performance of Tata Motors’ cars and SUVs.

Strong Business Numbers

TMCV is doing really well financially. In their estimates for the future (Q2FY26), they predict strong profits. The company’s expected to make a lot of money with healthy margins – 12.2% for EBITDA and about 9.8% for EBIT. They also expect a return on investment of around 45%.

The company is also being careful with money, spending only 2-4% of its sales on new projects. They’re also growing their business through things like providing parts and services to truck owners and using digital technology, which are good for profits.

Leading the Market

TMCV is the biggest seller of heavy trucks in India, with about 49% of the market for heavy trucks, 37% for buses, and 30% for smaller trucks. In the last quarter (FY25), sales went up by about 12% compared to the previous year, which was faster than the overall market.

Experts think this is because the government is building new roads and railways, freight rates are going up, and many old trucks are being replaced with new ones. This is a really good sign for TMCV’s future growth.

Expanding Globally

Tata Motors recently bought a company called Iveco, which makes trucks and buses, for about ₹38,000 crore. This will help TMCV sell its trucks in more countries around the world. They’ll be able to offer trucks that run on diesel, natural gas (CNG), and even electricity.

The deal is expected to make Tata Motors more money in the long run, but it will take a few years (around two) for the company to start making a big profit. They will pay back the money they borrowed over about four years.

How Much is it Worth?

ICICI Direct used a calculation called “SOTP” to figure out how much the company is worth. This means they looked at the value of the business as a whole and added up its different parts. They think the stock is worth ₹500.

To do this, they used a few different ways to value the company, like looking at how much money it makes (EBITDA) and how much its assets are worth (P/B ratio). They are expecting growth over the next few years.

What Could Go Wrong?

However, there are some risks to watch out for. The company’s sales might not grow as quickly as they hope, especially if the government doesn’t build new roads fast enough. Also, the cost of steel might go up, which could hurt profits.

The best investment is one you understand.