Tata Motors Emerges as Top Bet in Auto Sector, Maruti Suzuki Sees Downgrades

In a significant development, Tata Motors has emerged as the top bet in the auto sector, with the company topping the list of ratings upgrades in June. On the other hand, its rival Maruti Suzuki saw downgrades during the same period. The optimism surrounding Tata Motors is largely driven by its plans to demerge its commercial vehicles business into one entity and consolidate its passenger vehicles, including PV, EV, and JLR, into another entity.

According to Moneycontrol’s Analyst Call Tracker, the number of ‘buy’ calls for Tata Motors rose to 23 in June, up from 20 in the previous month. Meanwhile, ‘sell’ and ‘hold’ calls decreased by one each. In contrast, Maruti Suzuki saw a reduction in ‘buy’ calls to 31 in June, down from 33 in the previous month, while ‘sell’ and ‘hold’ ratings increased by one each.

The demerger of Tata Motors’ businesses into two separate entities is seen as a welcome move by analysts, who believe it will unlock value for investors. Sharekhan, a leading brokerage firm, notes that the demerger will provide an opportunity to invest in both the domestic passenger vehicle market and the global premium passenger vehicle segment. The firm also believes that the demerger will give investors another option to play on the mass-market PV growth story, making Tata Motors a more attractive option compared to Maruti Suzuki.

Tata Motors has also outlined plans to increase its market share in passenger vehicles and non-vehicle revenues in commercial vehicles, which has sparked optimism among analysts. The company aims to increase its market share in PVs from 14 percent in FY24 to 16 percent in FY27 and 18-20 percent by FY30, while also delivering strong double-digit EBITDA margins in CVs.

However, analysts at Sharekhan have highlighted that the PV segment is expected to grow by single digits in FY25, with demand skewed towards high-end products. This, combined with the rising trend of premiumisation and the upcoming initial public offer of Hyundai India, may moderate Maruti Suzuki’s earnings growth. The 17.5 percent surge in Maruti Suzuki’s shares in the year so far has also prompted analysts to be cautious over prospects of a further upside.

As a result, while Maruti Suzuki’s growth trajectory remains intact, analysts are choosing to prefer other rivals due to the availability of better options. The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. It is recommended that users check with certified experts before making any investment decisions.

Historical Context:

The auto sector has been a significant contributor to India’s economy, with the country being one of the largest automobile markets in the world. The sector has witnessed significant growth over the years, driven by increasing demand for passenger vehicles, commercial vehicles, and electric vehicles. Tata Motors and Maruti Suzuki are two of the largest players in the Indian auto sector, with a long history of competition and rivalry.

Tata Motors, founded in 1945, has been a pioneer in the Indian auto industry, with a presence in various segments, including passenger vehicles, commercial vehicles, and electric vehicles. Maruti Suzuki, founded in 1981, has been a dominant player in the passenger vehicle segment, with a strong brand presence and a wide range of models.

Recent Developments:

In June, Tata Motors emerged as the top bet in the auto sector, with the company topping the list of ratings upgrades. The optimism surrounding Tata Motors is largely driven by its plans to demerge its commercial vehicles business into one entity and consolidate its passenger vehicles, including PV, EV, and JLR, into another entity.

Key Points:

• Tata Motors has emerged as the top bet in the auto sector, with the company topping the list of ratings upgrades in June. • Maruti Suzuki saw downgrades during the same period, with a reduction in ‘buy’ calls and an increase in ‘sell’ and ‘hold’ ratings. • The demerger of Tata Motors’ businesses into two separate entities is seen as a welcome move by analysts, who believe it will unlock value for investors. • Tata Motors aims to increase its market share in passenger vehicles and non-vehicle revenues in commercial vehicles. • Analysts at Sharekhan have highlighted that the PV segment is expected to grow by single digits in FY25, with demand skewed towards high-end products. • The rising trend of premiumisation and the upcoming initial public offer of Hyundai India may moderate Maruti Suzuki’s earnings growth. • Analysts are choosing to prefer other rivals due to the availability of better options, with Tata Motors being a more attractive option compared to Maruti Suzuki.

Summary in Bullet Points:

• Tata Motors has emerged as the top bet in the auto sector, with a rise in ‘buy’ calls and a decrease in ‘sell’ and ‘hold’ ratings. • Maruti Suzuki saw downgrades, with a reduction in ‘buy’ calls and an increase in ‘sell’ and ‘hold’ ratings. • Tata Motors’ demerger plans are seen as a positive move, unlocking value for investors. • The company aims to increase its market share in passenger vehicles and non-vehicle revenues in commercial vehicles. • The PV segment is expected to grow by single digits in FY25, with demand skewed towards high-end products. • The rising trend of premiumisation and the upcoming initial public offer of Hyundai India may moderate Maruti Suzuki’s earnings growth. • Analysts prefer Tata Motors over Maruti Suzuki due to better options available.