Tata Motors CV: Why are analysts like JPMorgan and BoFA suddenly turning bullish on the stock?

Synopsis: After three years of decline, Tata Motors’ commercial vehicle business is picking up: demand has bottomed out, margins remain steady, and the Iveco acquisition boosts its global scale, all of which has pushed brokerages to get bullish.

In this article, we will look at why brokerages have recently become bullish on Tata Motors’ commercial vehicle business, what’s changed after a long slowdown, and whether the optimism reflects a true cyclical recovery or structural improvements within the business.

With a market capitalisation of Rs 1,51,970 crore, the shares of Tata Motors (CV) Ltd. made a day high of Rs 414 per share, up 5 percent from its previous day’s closing price of Rs 394.45 per share. 

What Changed? Why Optimism Is Rising Now

For almost three years, the commercial vehicle market has been weak, putting pressure on volumes. However, brokerages believe the worst part of this downturn is over, and several things are now working in Tata Motors’ favor.

First, market leadership acts as a buffer. Tata Motors holds about 46% of the medium and heavy commercial vehicle market and over 60% in heavy trucks. This strong position has helped the company keep prices stable and maintain profits even when demand was low.

Second, margins have stayed strong despite low volumes. Instead of focusing on increasing volume, Tata Motors concentrated on controlling costs, improving its product mix, and sticking to pricing discipline. As a result, the commercial vehicle business has continued to deliver a high return on capital employed of around 35%, which brokerages view as evidence of long-term strength.

Third, the Iveco acquisition alters the long-term outlook. The acquisition expands Tata Motors’ global presence, placing it among the top five commercial vehicle manufacturers worldwide. Although Iveco is currently facing challenges, analysts see significant medium-term value from Supply-chain synergies, Shared technology, and platforms, and a stronger position in Europe as demand rebounds

Finally, valuations still appear attractive. Despite better fundamentals, Tata Motors’ commercial vehicle division continues to trade at a lower value compared to global competitors. With margins expected to rise and free cash flow becoming clearer, brokerages believe a re-rating is likely as the market cycle improves.

Analyst Comments

JPMorgan believes the CV cycle is nearing its low point after almost three years of stagnation. It anticipates a recovery in demand in both India and Europe, aided by strong pricing discipline in the industry. JPMorgan views the Iveco deal as beneficial for margins over time and predicts a 13 percent EBITDA compound annual growth rate (CAGR) from FY26 to FY28. The firm maintains an Overweight rating with a target of Rs 475 (20 percent upside from the previous close).

Bank of America (BofA Securities) sees Tata Motors CV as a proxy play on the upcoming truck-cycle recovery in India and the EU. It highlights the company’s ability to maintain around 35 percent return on capital employed (ROCE) even during downturns, reduced regulatory risks, and an improved balance sheet following the Iveco acquisition. BofA expects a 15 percent EBITDA CAGR from FY26 to FY28 and has a Buy rating with a target of Rs 475 (20 percent upside from the previous close).

On the other hand, Nomura expects an upswing in India’s CV market to lead to volume growth of about 10 percent in FY26 to FY27. It forecasts EBITDA margins rising to 12 percent to 13 percent from FY26 to FY28. While noting that Iveco is currently experiencing a downturn, Nomura believes synergies will create value as global demand returns to normal, assigning a target of Rs 481 (22 percent upside from the previous close).

Ambit also started coverage with a Buy rating and a target of Rs 430 (9 percent upside from the previous close). It points to Tata Motors’ strong position in heavy commercial vehicles, stable margins, and healthy free cash flow. Ambit expects ROCE to stay above 25 percent and sees potential for re-rating as domestic demand improves and global integration advances.

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