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Tata Motors – Stock For the Month of March 2018

Date: 9 March, 2018

Price: Rs. 341.50

About Tata Motors

Tata Motors operates in 2 business segments – Automotive Operations and Others

[1] Automotive operations accounted for 98.95% of the total revenues in Q3 FY 2018. The Company’s automotive operations segment is further divided into Tata and other brand vehicles (including vehicle financing) and Jaguar Land Rover.

Jaguar Land Rover contributed 76% in Q3 FY 2018 (79% in FY 2017) of the Company’s total automotive revenue and only the remaining 24% in Q3 FY 2018 (21% in FY 2017) came from Tata and other brand vehicles.

 [2] Others – The other operations business segment includes information technology, machine tools and factory automation solutions.

Clearly, Tata Motors is largely being driven by JLR sales and company’s Indian operations have been a drain on its financials.

WHAT’S DRIVING THE STOCK

Growth in Domestic Business

In February 2018, the Company registered a growth of 38% at 58,993 units as against 42,679 units due to the continued strong sales performance of its Commercial and Passenger Vehicles Business in the domestic market.

Tata Motors Domestic Sales

The Company has also reported net profit of Rs. 182 Cr. in Q3 FY 2018. The Company’s standalone business had been loss-making for four consecutive years.

Tata Motors Product Portfolio

Gaining Market Share in both Commercial and Passenger Vehicles

The Company is on track to regain market share in both commercial and passenger vehicles. In the commercial vehicle market, demand for higher tonnage vehicles, increased government funding & growth in e-commerce has helped. For the passenger vehicle segment, some of the product launches like Nexon, Tiago, Tigor and Hexa have been received well by customers.

Tata Motors - Market Share

Government Push To Electric Vehicles (EV)

The government’s push towards electric vehicle will also prove to be positive for the Company. According to SIAM, electric vehicles will constitute 40% for overall new car sales by 2030. On 8th March, 2018, Energy Efficiency Service Ltd (ESSL) has floated another tender for 10,000 electric cars.

Earlier in December 2017, Tata Motors has successfully supplied its first batch of Tigor EV to ESSL, as part of the tender for 10,000 electric vehicles floated by the government in September.

Also in Auto Expo 2018, Tata Motors unveiled its range of six electric vehicles across personal as well as mass mobility categories.

Available at Discount As Compared to its Peers

Tata Motors Valuation

WHAT’S DRAGGING THE STOCK

Over the past one year, Tata Motors has fallen over 26% (from Rs. 467.60 to Rs. 345.15), on the other hand its competitor, Ashok Leyland in the medium & heavy commercial vehicles (M&HCV) has surged 59% (from Rs. 90.45 to Rs. 144.15) and Maruti Suzuki, its biggest competitor in passenger vehicle segment has rallied 46% (from Rs. 5964.40 to Rs. 8729.35).

WHY IS TATA MOTORS STOCK PRICE FALLING – the reason should really be Jaguar Land Rover (JLR) Motors.

The Company’s JLR business is facing multiple headwinds. In Q3 FY 2018, JLR’s volume sales declined in key western markets — the UK, US and Europe — and rose in China and the rest of the world.

Part of the weakness could be blamed on the phasing out 17 models of Range Rover and Range Rover Sport. However, new variants of these models will return this year. The greater concern is increasing restrictions on diesel vehicles in Europe (the company’s European and UK portfolio being predominantly diesel).

JLR is poised for a sharp recovery, driven by its promising product line like Range Rover Velar, Land Rover Discovery, Jaguar F-PACE, I-Pace and RR/RR Sport refresh. However the Company’s management indicated that weak market conditions in UK will constrain performance.