Jun 30, 2023
Tata Motors, a prominent player in the commercial and passenger vehicle industry, has experienced a remarkable surge in its share price, reaching a record high of Rs 595 in early trade today.
The company’s stock has shown remarkable growth since the outbreak of the pandemic, with a substantial increase of 489.1% from Rs 101 per share on 26 June 2020.
In 2023, the company’s shares have surged by over 44%. In the past three months, they have gained more than 33% and have been frequently reaching new 52-week highs.
In addition to its impressive stock performance, Tata Motors has also excelled in the Nifty 50 index this year, further solidifying its position in the market.
The company achieved a significant milestone by crossing the Rs 2 tn mark in market capitalisation, becoming the second private company to accomplish this feat.
Here is why shares of the company have been on a roll.
#1 Tata Tech IPO approval
The rise in Tata Motors shares can be attributed to the announcement of the Tata Technologies (Tata Tech) IPO and Tata Motors’ decision to sell a portion of its stake in Tata Tech.
The SEBI’s approval of the Tata Tech IPO indicates a potential value unlock for Tata Motors. As Tata Motors holds a substantial stake in Tata Tech, the IPO allows the company to monetize its investment and realize the value of its subsidiary.
Additionally, Tata Motors plans to utilise the proceeds from the sale of its Tata Tech stake to reduce its debt. This debt reduction strategy is viewed positively by investors as it improves Tata Motors’ financial position, reduces its interest burden, and enhances the company’s potential for profitability.
Additionally, the Tata Tech IPO represents a significant event as the first public issue from the Tata Group in 20 years. This milestone has generated excitement and interest among investors, who see it as an opportunity to participate in the growth potential of a Tata Group subsidiary.
#2 JLR’s Impressive Growth Momentum
The surge in the share price can also be attributed to the positive outlook for its luxury arm, Jaguar Land Rover (JLR), which has projected annual revenues of 28 bn pounds in the financial year 2024 against 22.81 bn pounds clocked a year back.
JLR has taken measures to improve its performance, including reducing break-even production levels by 50% in the financial year 2023 and discontinuing vehicle assembly at the Castle Bromwich plant as part of its transition to an all-electric platform.
These strategic decisions are expected to improve the company’s utilization levels and streamline operations. JLR has also been working on partnerships for battery sourcing, leveraging Agratas, a subsidiary of the Tata Group, which is establishing battery plants in India and Europe.
Further the company’s focus on the electric vehicle (EV) market has also attracted investor attention.
JLR management anticipates that EVs will contribute around 20% to the total volume by the financial year 2026. Plans for launching the first EV Range Rover in 2024 and a Jaguar pure-electric vehicle in 2025 indicate a commitment to tapping into the growing EV market.
Furthermore, the increased share of EVs in JLR’s product lineup is expected to help achieve CO2 emission compliance by 2028, as these vehicles contribute to reducing blended emissions.
This positive outlook has further added to the rally.
Positive long-term outlook
Going forward, the company’s Indian business is set to benefit from a favourable demand cycle and improvements in its passenger vehicle (PV) franchises.
As the largest electric vehicle (EV) player in the country, Tata Motors has established an early lead in the PV segment by focusing on SUVs and incorporating attractive product styling.
In the commercial vehicle segment, which includes trucks and mini-trucks, growth is expected to be robust, with an anticipated increase of 7% in the financial year 2024 and 11% in the financial year 2025, representing a significant jump of 4%.
However, despite the promising outlook, there are potential risks that could impact estimates. Supply chain constraints stemming from geopolitical tensions and concerns over a global recession and a spike in commodity prices pose challenges for the company.
Additionally, lower-than-expected growth in India due to macroeconomic slowdowns or an insufficient rainfall season is also a potential headwind that could affect the company’s estimates.
How Tata Motors have performed recently
Shares of Tata Motors have surged over 13% in the past month. Over the past five days, the stock is up 6%.
Tata Motors shares touched a 52-week high of Rs 598.0 on 30 June 2023 and a 52 -week low of Rs 375.2 on 26 December 2022.
About Tata Motors
Tata Motors Limited is a leading global automobile manufacturer with a portfolio that covers a wide range of cars, SUVs, buses, trucks, pickups, and defense vehicles.
It’s a US$ 34 bn organisation and a leading global automobile manufacturing company.
Tata Motors is one of India’s largest OEMs offering an extensive range of integrated, smart, and e-mobility solutions.
Tata Motors has a strong presence in India, but it also exports its vehicles to over 100 countries around the world. The company has a number of joint ventures with other automotive manufacturers, including Fiat, Jaguar Land Rover, and Daimler.
To know more about the company, check out Tata Motors financial factsheet and its latest quarterly results.
You can also compare Tata Motors with its peers:
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And to know what’s moving the Indian stock markets today, check out the most recent share market updates here.
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