Bank of America Merrill Lynch upgraded Tata Motors to ‘buy’ from ‘neutral’ and raised its target price by 26 per cent to Rs 360 based on expectations that Tata's key unit, Jaguar Land Rover (JLR), will meet full-year sales expectations of 363,000 units and sustain momentum.
At home, the investment bank said, Tata's truck/bus unit is closer to a trough, while light commercial vehicles are "growing ahead of peers" and the utility vehicles segment is benefitting from a structural uptrend.
The domestic cars unit may not recover, Bofa-ML added, but said lowered expectations have been built into forecasts.
Tata Motors was the best performer among the 30-share Sensex stocks in 2012, helped by hopes for a turnaround in the performance of its luxury JLR unit.
Tata Motors, the world's 18th largest motor vehicle maker, yesterday reported total sales of commercial and passenger vehicles at 65,582 units (including exports) during December, of which 65,582 units were sold in the domestic market.
The company sold 47,515 commercial vehicles, 37,649 light commercial vehicles (LCVs) and 9,866 medium and heavy commercial vehicles in the month. It had reported total sales of 66,500 units in November, which was 13.43 per cent less than total sales during the same month a year ago.
JLR’s global sales in November increased by 14 per cent to 29,893 units.
During the month, Jaguar sold 4,031 vehicles, down 5 per cent on "anticipation of the introduction of the 2013 model year XF and XJ model ranges, including all-wheel drive and new engine options”, JLR said in a statement.
In November, Land Rover sold 25,862 vehicles, up 17 per cent compared to the same month previous year.
Sales in November increased in almost every major market with sales growing in China by 43 per cent, Asia -Pacific by 26 per cent, the UK by 15 per cent and Europe by 12 per cent.
BofA-ML expects an increase in profit forecasts by 15-25 per cent on better sales mix.
Despite the stock’s outperformance, it remains a key pick in the auto sector, the investment bank added.
With inputs from Reuters