Morgan Stanley downgrades Tata Motors to Neutral, revises price target
Analysts at Morgan Stanley have officially downgraded the stock of Tata Motors Ltd. (NSE: TATAMOTORS) to Neutral from Overweight, while raising its price target to INR 935 from INR 920. The move reflects growing concerns over the evolving growth prospects of the commercial vehicle (CV) segment in India and input cost pressures that could weigh on margins in the medium term.
In its latest analyst report, Morgan Stanley said it expects a mixed business environment for the heavy truck and passenger vehicle segments, as consumer demand has yet to fully recover from the pandemic and raw material costs – particularly steel and aluminium – continue to be volatile. Tata Motors’ bus revenue growth forecast for FY26 has been revised down but remains around 14%, lower than earlier expectations.
Margins are under pressure as rising manufacturing and operating costs are eating away at the profits made in recent years. The analyst has also revised down EBITDA estimates for FY26 and FY27 by around 3-4%, based on lower-than-expected sales volumes and average selling prices, as well as tax implications and changes in market structure.
However, the report also noted Tata Motors’ financial strength with a significantly improved balance sheet and effective cost control over the long term. Morgan Stanley notes that the stock’s ability to revalue could depend largely on improved sales quality in the second half of fiscal 2026.
Currently, Tata Motors shares are trading at an EV/EBITDA multiple of around 10.8x, which is close to the company’s five-year historical average. This suggests that the fundamentals are largely priced in by the market.
Investment warning:
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