On the back of a strong performance across its key business segments, Tata Motors stock has significantly outperformed key indices with 204 per cent return in the last 36 months versus 50 per cent return in the Nifty, Motilal Oswal Financial Services said in a report.
“We have already factored in most of the positive triggers in our estimates. While the business demerger seems to be a step in the right direction, we do not foresee any need to revisit our TP, which is already based on SoTP valuation”, it said.
Tata Motors board approved the proposal to demerge the company into two separate listed entities, viz a) CV and its related investments and b) PV, including India PV, EV, JLR, and related investments.
This comes across as a logical progression of separate reporting of the CV and India PV financials run by their respective CEOs (since 2021). We believe this signifies management’s confidence that the two businesses can operate independently with self-sustaining cash flows, Emkay Global Financial Services said in a report.
The announcement of demerger between the two businesses of Tata Motors into CVs and PVs shall split the business value into half and should enable focussed approach and flexibility. Also the synergies are lacking in both the businesses, which explains the move. Their volume performances, margins, drivers, competitors are totally diverse, says Ashwin Patil, Senior Research Analyst at LKP Securities.
Tata Motors stock is up 4.6 per cent following the demerger announcement at Rs 1033 on BSE.