Buy Tata Motors Ltd for the Target 600 by Emkay Global Financial Services Ltd
We attended Tata Motors (TMCV) Analyst Day (link), where the management highlighted that the global CV industry is entering a new phase of evolution led by four themes: connected vehicles, ADAS, decarbonization, and softwaredefined vehicles. On domestic CV growth, TMCV indicated double-digit volume growth is visible in Q1FY27 (momentum to sustain in Q2). FY27 growth is guided at high-single digits, reflecting normalization in H2 on a high base. The freight ecosystem remains healthy (freight movement expected to rise from ~2.6trn ton-kms to ~3trn ton-kms by FY30) led by strong infra spends, rising fleet utilization, and continued e-com penetration. Despite recent fuel price fluctuations, fleet operators maintain healthy economics and are able to pass on fuel cost hikes to consumers. While commodity inflation remains a near-term headwind, TMCV has taken calibrated price hikes (1% in Jan-26; 2% in Apr-26; 2.5% from Jul-26), which, coupled with ongoing cost initiatives, should help sustain double-digit EBITDAM in FY27 (with potential for teens EBITDAM during favorable upcycles). The management reiterated that the IVECO acquisition will be completed by Q2FY27. The European CV cycle is also showing early signs of recovery, with improving demand trends, which is positive for IVECO. We build in 7%/10% volume/revenue CAGR over FY26-28E and keep our estimates unchanged. Retain BUY with an unchanged SOTP-based TP of Rs600
H1 momentum to continue; H2 to see moderation on a high base
TMCV indicated that the CV industry has witnessed double-digit growth during Apr/May26 and expects this to sustain through Q2, led by a favorable base. However, growth is likely to soften in H2 as the industry laps a stronger demand environment in Q3/Q4FY26 due to GST rate cuts. Overall, TMCV remains constructive on the demand outlook and expects to deliver high-single-digit growth in FY27, led by healthy freight movement, improving fleet utilization, and continued infra spends.
RM headwinds to hurt near-term margins; double-digit margin guided for FY27
TMCV acknowledged commodity cost pressures as a near-term headwind. To mitigate this, it has taken calibrated price hikes, along with cost optimization, value engineering, and improved product mix. Despite RM inflation, the management remains confident of sustaining double-digit EBITDAM in FY27 and reiterated profitability as a non-negotiable objective. Margins could revert to teens during a favorable industry upcycle
Iveco acquisition on track; multiple synergies in play
TMCV stated that the IVECO acquisition remains on track for completion by Q2FY27, with most regulatory approvals already secured. Multiple synergies are expected across procurement, engineering, platform sharing, and digital capabilities. TMCV sees significant sourcing optimization potential, given IVECO's relatively low procurement exposure to non-Western suppliers, along with cross-selling opportunities across geographies leveraging IVECO's FPT powertrain portfolio in India and long-term cost efficiencies through shared engineering platforms and digital tools.
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