IDEA2ACT - Buy: Tata Motors Limited

Buy - TATAMOTORS

CMP (NSE) 15:59, 21 Sep

301.95 31%

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Sector

Automobiles

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Reco. Price

341

Period

12-Months

Target Price

410

upside

%

Stop Loss

0

Last updated on

06 Jul, 2021

Tata Motors Limited is a leading global automobile manufacturer. The company offers a wide and diverse portfolio of cars, sports utility vehicles, trucks, buses, construction equipment and defense vehicles globally. It has operations in India, the UK, South Korea, South Africa, China, Brazil, Austria and Slovakia through a strong global network of subsidiaries, associate companies and Joint Ventures.

Investment Rationale

Market leader in Electric Vehicles Segment in India: Tata Motors is the front runner in the electric vehicle segment in India and accounted for 71.4% of the total EV sales in India. The company saw more than threefold increase in electric vehicles sales in FY21 compared to FY20. It also plans to capture more market share through EV portfolio expansion. Tata Motors along with Tata Power, has been setting up high-speed charging infrastructure to boost EV adaption in the country. The company has planned to price its green cars at a premium of not more than 15-20% to conventional cars. Also, JLR has electrified 12 out of 13 nameplates.

Outlook

Tata Motors reported a strong recovery in FY21 with highest ever revenue in the PV segment in the last 8-years, while the CV segment was back to pre-covid levels. The margins have improved significantly with reduction in certain fixed costs. The Government of India’s push for electric vehicles is likely to benefit the company. We expect normalcy of operations from Q2/Q3 FY22 as the rapid pace of vaccination and lower covid cases will lead to a gradual opening up of the economy. The volume recovery in JLR, mostly from the USA and China in Q4FY21 gives a sign that things are reversing for them. The Management has also indicated launch of new vehicles in the EV segment which is likely to give them a thumping lead over their competitors in that segment. The company also plans to become a near zero-debt company in the next three years.

With the kind of vision that the company has for its EV segment and the road map they have set for JLR, we think that Tata Motors has a lot of potential in the coming time. Hence, we recommend a Buy on Tata Motors with a Target price of Rs.410 based on SOTP valuation.

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