Tata Motors CV shares: Nomura sees 29% upside, cuts target price to Rs 511
Tata Motors Commercial Vehicles reported standalone revenue of Rs 240 billion in Q2FY27, up 42% year on year, compared with Nomura's estimate of Rs 245 billion and Bloomberg consensus of Rs 246 billion
Nomura has lowered its target price for Tata Motors Commercial Vehicles to Rs 511 from Rs 554, while highlighting a positive outlook for the commercial vehicle (CV) industry. The revised target price implies an upside of 29%, according to the brokerage. In its October 23 report, Nomura said Tata Motors Commercial Vehicles' second-quarter performance was broadly in line with expectations, but higher-than-expected commodity prices were likely to delay margin recovery.
The brokerage lowered its EBITDA estimates for FY27-29 by 4%, 6% and 3%, respectively. Q2 performance broadly in line with estimates Tata Motors Commercial Vehicles reported standalone revenue of Rs 240 billion in Q2FY27, up 42% year on year, compared with Nomura's estimate of Rs 245 billion and Bloomberg consensus of Rs 246 billion. Average selling price declined 0.5% quarter on quarter to Rs 1.78 million, against Nomura's estimate of Rs 1.80 million.
EBITDA rose 30% year on year to Rs 28 billion, 1.5% below both Nomura's and consensus estimates. The standalone free cash flow stood at Rs 46 billion, while net cash increased to Rs 113 billion at the end of the quarter from Rs 71 billion in Q1FY27. CV demand outlook remains positive Nomura raised its FY27 forecast for medium and heavy commercial vehicle (MHCV) industry demand growth to 15% year on year from 8%, citing strong demand momentum.
The revised forecast implies growth of around 7% in the second half of FY27. E-commerce and mining are key demand drivers, while the ageing truck fleet is expected to support the replacement cycle. Management expects growth in the third quarter of FY27 to be in the high single digits to low double digits. The company said freight rates increased in Q2 and vehicle utilisation improved through the quarter, with transporter profitability recovering after a dip at the start of Q2.
Capacity expansion is also under way, and Tata Motors Commercial Vehicles gained market share in the first half of FY27. Nomura flagged rising interest rates and further increases in oil prices as key risks to demand. EV sales rise 143%; commodity costs pressure margins Electric vehicle sales rose 143% in Q2, accounting for 12% of the small commercial vehicle segment's sales mix. Management expects the share to rise to 20% by Q4FY27.
It said EV margins remained healthy, including the benefits of the production-linked incentive scheme. The company's Indonesia order is expected to be delivered over FY27-28, while exports overall remain margin-accretive. Management also expects the Iveco deal to close by early November 2026. Commodity costs increased by 200 basis points quarter on quarter in Q2, with a further 150-200 basis points of cost pressure expected in Q3FY27.
The company implemented a price hike of 1-2% in October 2026. Nomura said margin recovery was likely to be delayed because of higher-than-expected commodity prices. However, it expects costs to be passed on over time, given the consolidated nature of the industry. Nomura lowers earnings estimates and target price Nomura estimates MHCV growth for Tata Motors Commercial Vehicles at 15%, 5% and 5% in FY27, FY28 and FY29, respectively, reflecting 5% higher volume assumptions.
It also raised its light commercial vehicle estimates by around 5% for FY27 and 3% for FY28. The brokerage now estimates EBITDA margins of 11.8% in FY27, 12.5% in FY28 and 13.1% in FY29, around 100-140 basis points lower than its previous estimates of 12.8%, 13.9% and 14.1%, respectively. Its EPS estimates remain 5-10% ahead of consensus over FY27-29. For Iveco, Nomura estimates EBIT margins of 2.8%, 4.6% and 5.4% in FY27, FY28 and FY29, respectively.
The new sum-of-the-parts-based target price of Rs 511, against Rs 554 earlier, reflects a lower valuation multiple for the India CV business. Nomura cut the enterprise value-to-EBITDA multiple to 11 times average FY28-29 EBITDA from 12 times, citing higher risk-free rates and the risk of higher oil prices. The multiple remains within its expected range of 10-15 times. The brokerage retained a 4-times EV-to-EBIT multiple for Iveco, based on CY28 estimates, and rolled forward the valuation to December 2027.
