Nomura Initiates Buy on TMCV as Truck Cycle Revives

Japanese brokerage firm Nomura has initiated coverage on Tata Motors Commercial Vehicles (TMCV) with a ‘Buy’ recommendation, pointing to improving industry fundamentals and early signs of recovery in India’s truck cycle. The brokerage has set a target price of ₹481, indicating nearly 20 per cent upside from current market levels following the recent demerger of Tata Motors’ commercial vehicle business.

Nomura’s initiation comes at a time when the domestic medium and heavy commercial vehicle (MHCV) segment is showing signs of revival after a prolonged period of muted growth.

India MHCV Cycle Showing Early Recovery

Nomura’s positive stance is anchored in an improving outlook for the Indian MHCV industry. After expanding at a modest rate of around 4 to 5 per cent in recent years, the sector is expected to witness stronger growth ahead. The brokerage projects MHCV volumes to grow by 8 per cent in FY26 and accelerate further to 10 per cent in FY27, before moderating to around 5 per cent in FY28.

According to Nomura, rising freight rates have materially improved fleet operator profitability, creating a more supportive demand environment for new truck purchases.

TMCV Well Positioned With Market Leadership

TMCV is expected to be a key beneficiary of the anticipated upcycle, supported by its dominant position in the domestic MHCV market. Nomura highlighted that the company held a 46 per cent market share in the MHCV segment in FY25, giving it strong leverage to volume recovery.

The brokerage forecasts MHCV volume growth of around 10 per cent year-on-year for TMCV in both FY26 and FY27, driven by replacement demand and improving utilization levels across fleets.

Margin Expansion Outlook Improves

Nomura also expects operating metrics to strengthen over the medium term. Improving operating leverage, benign commodity prices, and lower discounting are likely to support margin expansion. Ebitda margins for TMCV are projected to rise to the 12–13 per cent range over FY26 to FY28.

Additionally, Nomura’s earnings per share estimates for TMCV are 12–11 per cent higher than consensus expectations for FY27 and FY28, reflecting confidence in the company’s profitability outlook.

Iveco Acquisition Seen as Long-Term Positive

While the domestic CV business supports near-term growth, Nomura noted that TMCV’s €3.8 billion acquisition of Iveco’s truck business could act as a short-term drag, as Iveco is currently navigating a cyclical downturn. Growth recovery for Iveco is expected only from FY27 onwards.

However, the brokerage believes the acquisition offers long-term strategic benefits, including supply chain synergies, enhanced product development, and access to new global markets. In its valuation, Nomura assigns a 12x EV/Ebitda multiple to TMCV’s CV business and values Iveco at 4x EV/Ebit.

Ashok Leyland Remains Preferred CV Play

Among peers, Nomura reiterated Ashok Leyland as its preferred play on the domestic CV upcycle. The brokerage maintained a ‘Buy’ rating with a target price of ₹196, citing its 31 per cent MHCV market share and pure-play exposure to domestic demand recovery.

Regulatory and Replacement Demand Tailwinds

Nomura expects regulatory changes to push up vehicle prices in the coming years, potentially triggering pre-buying demand in FY27 and FY28. With the average age of trucks on Indian roads estimated at around 10 years, well above the typical replacement cycle, latent replacement demand is seen as a strong structural tailwind.

Overall, Nomura believes India’s commercial vehicle sector is entering a favorable phase, with TMCV and Ashok Leyland well positioned to benefit from rising volumes, margin expansion, and improved earnings visibility.