Deven Choksey research team has reiterated a BUY recommendation on with a target price of Rs 469, implying an upside potential of nearly 23% from the current market price of Rs 380. The brokerage believes the company’s commercial vehicle business is no longer behaving like a traditional cyclical auto manufacturer. Instead, it is evolving into a structurally stronger, cash-generating global franchise backed by improving operating margins, international expansion, and rising contribution from high-margin non-cyclical businesses such as after-market services and fleet solutions. The report highlights that Tata Motors’ commercial vehicle transformation, export momentum, and strong balance sheet could drive sustained earnings compounding over the next two years.

Deven Choksey Sees Structural Re-Rating in Tata Motors’ CV Business

The brokerage believes Tata Motors has crossed an important strategic inflection point. According to the report, the company’s EBITDA margin expanded sharply from 7.8% in FY23 to 13.2% in FY26, while EBIT margins crossed double digits for the first time and touched 11%. This improvement, the brokerage argues, is not merely cyclical but reflects a fundamental transformation in the quality of the business.

Management commentary during the earnings call suggested nearly 70% of the recent margin improvement came from sustainable factors such as product mix improvement, operational efficiency, and growth in non-cyclical revenue streams. Businesses like spares, after-market services, and fleet solutions have reportedly grown nearly 2.7 times faster than the core cyclical commercial vehicle segment over the last three years.

Q4FY26 Numbers Showcase Strong Operating Momentum

Tata Motors delivered a robust operational performance during the March quarter. Revenue from operations rose 22.3% year-on-year to Rs 24,451 crore, while EBITDA surged 35.2% to Rs 3,404 crore. EBITDA margins improved to 13.9% compared with 12.6% in the same quarter last year.

Profit before tax jumped 57.7% to Rs 2,970 crore, while reported PAT climbed 70.1% to Rs 2,409 crore. Wholesale volumes increased 24.9% year-on-year to 131.8K units, supported by broad-based demand across heavy commercial vehicles, intermediate and light commercial vehicles, passenger carriers, and small cargo vehicles.

Cash Flow Generation Emerges as a Major Strength

One of the most striking aspects of the report is Tata Motors’ free cash flow profile. The company generated nearly Rs 9,186 crore in free cash flow during FY26, translating into a free-cash-flow-to-revenue ratio of roughly 12%, among the strongest in the Indian automobile sector.

The brokerage noted that Tata Motors has significantly strengthened its working capital discipline while simultaneously maintaining capex intensity at only 2–4% of revenue. Auto ROCE expanded dramatically to 72% compared with just 14% in FY23, indicating a sharp improvement in capital efficiency. Net cash also improved materially to Rs 7,500 crore in FY26 versus Rs 1,600 crore in FY25.

Indonesia Order and Iveco Acquisition Could Redefine International Presence

The report places significant emphasis on Tata Motors’ global ambitions. The company secured a landmark 70,000-unit export order from Indonesia for its Yodha and Ultra T.7 platforms — the largest export order in its history. Management indicated that shipments have already commenced and execution could accelerate meaningfully in coming quarters.

Additionally, the proposed acquisition of Iveco, valued at approximately EUR 3.8 billion or Rs 41,691 crore, is expected to close by Q2FY27 pending final financial regulatory approvals in France and Spain. The brokerage believes the transaction could provide Tata Motors direct access to the European commercial vehicle market and potentially contribute incremental revenues of Rs 15,000–20,000 crore over the medium term.

Domestic Commercial Vehicle Cycle Remains Favorable

Industry fundamentals continue to support a positive medium-term outlook. The report highlighted that improving freight activity, infrastructure spending, and regulatory-led replacement demand are likely to support the commercial vehicle industry over the next several years.

CRISIL expects industry volumes to reach a record 12.4 lakh units in FY27, surpassing the earlier FY19 peak. The reduction in GST rates from 28% to 18% has improved affordability, while the government’s Rs 11.1 lakh crore infrastructure push and Dedicated Freight Corridor commissioning are expected to strengthen freight intensity across India. Upcoming ADAS mandates, CAFE-III norms, and BS-VII regulations may further accelerate replacement demand.

Electric Vehicle and Export Businesses Add New Growth Layers

The company’s EV strategy also appears to be gaining traction. Tata Motors reported that small commercial vehicle EV penetration improved to nearly 7% in recent months compared with a FY26 average of 4%. The newly launched Intra EV platform has reportedly received encouraging market response.

Meanwhile, cumulative e-bus deployment crossed 3,815 units with uptime exceeding 96%, reflecting improving execution capability in the electric mobility business. International volumes grew 54% year-on-year during FY26, largely driven by ASEAN markets, reinforcing the brokerage’s thesis that Tata Motors is steadily evolving into a global commercial vehicle franchise.

Financial Outlook Suggests Sustained Earnings Expansion

Deven Choksey expects Tata Motors to maintain healthy earnings momentum over FY26–FY28. The brokerage projects revenue to increase from Rs 77,399 crore in FY26 to Rs 92,302 crore by FY28, while PAT is expected to rise sharply from Rs 3,362 crore to Rs 7,195 crore over the same period.

EPS is projected to improve from Rs 9.13 in FY26 to Rs 19.54 in FY28. The brokerage values the stock at 24x FY28 estimated earnings and believes the current valuation still discounts the company’s improving business quality and cash-generation profile.

Risks Investors Should Watch Carefully

Despite the optimistic outlook, the brokerage flagged multiple near-term risks. Commodity inflation remains elevated, particularly in steel, crude oil, copper, and aluminium. Management indicated that commodity inflation already impacted Q4 margins by roughly 100 basis points and further pressure may continue into Q1FY27.

Additionally, diesel prices remain a key variable because fuel accounts for nearly 30–50% of transporter operating costs. Any sustained increase could delay replacement demand in heavy commercial vehicles. Geopolitical disruptions in West Asia and increasing rail competition from Dedicated Freight Corridors also remain monitorable risks for freight-linked demand.