Synopsis: CLSA has initiated coverage on Tata Motors Ltd’s commercial vehicle business with an “Outperform” rating and Rs. 673 target, implying 35% upside, citing cyclical recovery, strong cash flow outlook, deleveraging potential, and synergies from the Iveco acquisition.
The shares of this company are engaged in the manufacturing and sale of commercial vehicles which include trucks, buses, and small commercial vehicles are in the spotlight after CLSA initiated an Outperform target of 35 percent upside from the current levels.
With a market capitalisation of Rs. 1,83,324 cr, the shares of Tata Motors Ltd closed at Rs. 497.85 per share, decreasing 1.4% and making low of Rs. 411.05, down from its previous close of Rs. 504.90 per share.
CLSA on Tata Motors
Global brokerage firm CLSA has initiated coverage on Tata Motors commercial vehicle (CV) business with an “Outperform” rating and a price target of Rs. 673, implying a potential 35% upside from current levels. The brokerage believes the demerged CV arm is well-positioned to benefit from an improving demand environment.
According to CLSA, the commercial vehicle cycle is turning favourable in both India and the European Union, creating strong tailwinds for volume growth and margin expansion. The brokerage sees a cyclical recovery underway, supported by replacement demand, infrastructure activity, and improving macro conditions across key markets.
Despite the €3.8 billion acquisition of Iveco, CLSA expects the company to generate strong free cash flow over the next two years. This is likely to support balance sheet deleveraging by FY28, even after accounting for the additional debt taken on to fund the deal.
The brokerage also highlights strategic benefits from the Tata CV–Iveco combination, including scale advantages and supply-chain synergies. In addition, rising adoption of electric vehicles in the light commercial vehicle (LCV) segment is expected to provide a structural growth driver, strengthening the long-term outlook for the business.
Future Outlook
In FY26, the company expects demand momentum to remain strong, supported by the continued impact of GST 2.0 and improving market sentiment in Q3. A sustained government push on infrastructure and expansion across key end-use sectors are likely to further boost demand in Q4FY26, particularly across most commercial vehicle segments.
The company will focus on driving growth across its core segments, including delivering strong performance from its newly launched truck portfolio, executing its 6,000+ government order book in the passenger CV segment, and ramping up volumes in SCV&PU models such as Ace Pro, Ace, and Intra. It also aims to sustain momentum in parts, services, and international operations, while maintaining consistent EBITDA margins, healthy cash flows, and strong ROCE.
Financials
The Commercial Vehicles segment of Tata Motors Ltd reported revenue from operations rising from Rs. 18,478 crore in Q3FY25 to Rs. 21,533 crore in Q3FY26, an increase of about 16.5% YoY. EBITDA improved from Rs. 2,291 crore to Rs. 2,724 crore, up 19%, while EBIT grew from Rs. 1,774 crore to Rs. 2,291 crore, marking a rise of 29%. Profit before tax (before exceptional items) increased from Rs. 1,681 crore to Rs. 2,290 crore, registering a growth of 36% YoY.
On the margins front, EBITDA margin expanded from 12.4% to 12.7%, an increase of 30 basis points, while EBIT margin improved from 9.6% to 10.6%, up by 100 basis points year-on-year.
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