US Tariff Woes: Emkay cuts Tata Motors target to ₹800 but retains ’buy’ call on valuation appeal

Domestic brokerage firm Emkay Global has reiterated its ‘Buy’ rating on Tata Motors, despite the company’s recent share price crash and mounting macroeconomic headwinds. While the brokerage has cut its target price by 16 percent to ₹800 apiece, the new target still suggests a potential upside of 34 percent from current levels.

Tata Motors’ shares have plummeted nearly 27 percent in the past three months, dragged down by a broader global market correction, with about 17 percent of the fall coming after the United States imposed a 25 percent tariff on automobile imports. The impact of this decision is significant, especially considering Tata Motors' UK-based subsidiary Jaguar Land Rover (JLR), which derives roughly 32 percent of its sales from North America.

Valuations Attractive, JLR Recovery Overlooked

Emkay Global argues that the market is completely ignoring JLR’s valuation potential despite a solid turnaround in operations and balance sheet improvement. The brokerage noted that JLR’s implied FY27 EV/Sales ratio of 0.7x is hovering near historic lows, compared to the 0.5x ratio seen during earlier macroeconomic shocks.

Even under a bear-case scenario assuming a 25 percent drop in JLR's US sales, Emkay pointed out that Tata Motors' financial health remains on strong footing. Net auto debt-to-equity is expected to stay healthy at 0.24x by FY27, compared to 1.1x in FY22.

“Tata Motors has already achieved its net-cash balance sheet objective for FY25,” Emkay said, adding that this milestone underscores a fundamental transformation in the company’s financial architecture over recent years.

Stress Tests Reflect Manageable Risks

To further account for prevailing risks, Emkay has baked in a volume weakness in its earnings model. The brokerage now expects a 5 percent decline in JLR sales across the US and China, with flat performance in other markets for FY26, followed by muted volumes in FY27.

A stress test conducted by Emkay assumes an even sharper decline—25 percent drop in North American volumes and a 15 percent decline elsewhere in FY26—which would lead to an 18 percent overall volume decline for JLR in that fiscal. The test also factors in softer average selling prices and margin compression.

Despite this, Emkay believes Tata Motors' core story of operational turnaround, including profitability in both its commercial and passenger vehicle businesses in India, remains largely intact.

“Tata Motors has strengthened JLR’s brand image and profitability while turning the balance sheet net-cash positive in FY25—a stated strategic goal. Yet, the market is ignoring this turnaround,” the brokerage noted.

Long-Term Story Intact Amid Short-Term Turbulence

While recent events like the US tariff decision and weak Chinese demand have clouded the outlook, Emkay Global maintains that Tata Motors remains on solid ground. The firm’s improving financials, robust domestic performance, and strong operational discipline across its global arms give it a resilient foundation for long-term growth.

The current correction in Tata Motors' stock may offer investors an attractive entry point, especially with JLR’s value being overlooked by the market. For those with a medium to long-term horizon, the stock still holds promise, even amid short-term volatility.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.