After a sustained lull, Tata Motors’ investors finally have something to smile about this year. Ranked an outperformer, the automaker has staged a swift rally in line with the latest move shown by Nifty which jumped a whopping 18 per cent from the low of 15,183 it hit on June 17.
Tata Motors stock price has advanced 26 per cent from the lows of June 2022 to Rs 485. Since its low of Rs 63.6 on March 24, 2020 in the aftermath of Covid-19 and lockdown, the Tata Motors stock surged a whopping six times to hit a high of Rs 361 in June 2021 within a span of more than 12 months last year.
The parent company of Jaguar Land Rover (JLR) has handsomely rewarded its investors with the stock price spiking on the back of cheap valuations and sales getting restored with the economy opening up. The stock is, however, still down 19 per cent from the record high of Rs 605 it touched in February 2015.
All In The Numbers
Tata Motors has been consistently narrowing its loss over the years. For FY22, its standalone loss narrowed to Rs 1,739 crore from Rs 2,295 crore in FY21. The company had posted a massive loss of Rs 7,290 crore in FY20.
Its sales have crossed pre-Covid levels and in the fiscal year gone by, Tata Motors’ gross sales advanced 57 per cent to Rs 47,263.68 crore from Rs 30,175 crore in FY21.
The company's fortunes turned around after Tata Sons chairman N. Chandrasekaran took over as the chairman of Tata Motors in 2016 when the company was facing various challenges on the local and international front.
In the annual report of 2022, Chandrasekaran commented that the company will restore the profitability of its automobile business and get to near-zero net debt by FY24. That has also led to bullish sentiment in the stock, say analysts.
Changing Perceptions
With the launch of various new products, Tata Motors has been able to change its perception from what it was viewed as five-seven years ago, says Vijay Chopra of Enoch Ventures.
Comparing Tata Motors to Tesla, Chopra says that it is the largest EV player in India and with the kind of models they are coming up with, it shows that they have improvised to a great extent from what it was used to do five-seven years ago. Their JLR models are getting revamped and with the launch of EVs, JLR is going to lead the world in EV play just like Tesla, he adds.
Meanwhile, Tata's chemical unit, Tata Chemicals, is working on making sodium-ion batteries apart from the usual lithium-ion ones and has also set up a plant in the UK. The automaker is also planning to invest in chip making. If the chip and batteries businesses fructify with their own capacity in metals space and the backward and forward integration, they will be able to benefit from economies of scale, says Chopra.
Valuation wise, the stock is also looking cheap when compared to Maruti Suzuki, country’s largest carmaker. There is a major valuation mismatch between Maruti and Tata Motors. Maruti Suzuki’s market cap-to-sales ratio is three times higher as compared to Tata Motors' market cap-to-sales ratio of 0.62 and that shows the stock is undervalued. Tata Motors’ operating margin is 9 per cent and Maruti's is 7 per cent which shows that the valuation will catch up going ahead, Chopra adds.
Calling it the number one player in EV market in India and with a global presence, Chopra says that the Tata Motors stock can go up to Rs 800 but investors have to buy and hold the stock.
