Tata Motors, one of India’s most renowned automotive giants, has been a consistent player in the domestic and global automotive markets for decades. With a rich history and a diverse portfolio of vehicles, including passenger cars, commercial vehicles, and luxury brands like Jaguar Land Rover, Tata Motors holds a prominent position in the automotive industry.
In this comprehensive review, we delve into the recent performance and prospects of Tata Motors’ shares, exploring the factors influencing its stock price, financial health, market positioning, and the broader industry trends that impact its trajectory. Whether you’re an investor, an automotive enthusiast, or simply curious about the company’s current standing, this analysis will provide valuable insights into the world of Tata Motors’ shares.
Analysis: How Tata Motors Shares are Performing
To analyze the performance of Tata Motors shares, let’s look at various aspects:
Tata Motors Performance Analysis:
Performance Across Time Frames:
1 Month: The significant 14.62% increase in share price over one month reflects strong upward momentum. This could be driven by various factors, including robust financial performance, positive industry trends, or market optimism about future prospects.
3 Months: Tata Motors’ share price has surged by 37.95% over three months, indicating substantial growth within a relatively short period. This suggests that the company may be executing its strategic initiatives effectively, leading to improved investor sentiment and confidence.
1 Year: With a remarkable 112.55% increase in share price over one year, Tata Motors has delivered exceptional returns to investors. This could be driven by factors such as improved financial performance, successful product launches, or favorable macroeconomic conditions.
3 Years: Tata Motors has recorded an impressive share price growth of 185.12% over three years, indicating sustained long-term success. This suggests that the company has been able to deliver value to shareholders consistently over the medium term.
5 Years: Over five years, Tata Motors’ share price has soared by 480.64%, demonstrating exceptional long-term performance. This substantial growth highlights the company’s ability to adapt to changing market dynamics, capitalize on opportunities, and deliver value to investors over an extended period.
Revenue Growth:
Tata Motors has showcased impressive financial performance with its annual revenue growth of 24.54%, surpassing its 3-year Compound Annual Growth Rate (CAGR) of 9.81%. This indicates a significant acceleration in revenue generation, reflecting the company’s effective business strategies, successful market expansion efforts, or strong operational performance. Outperforming its own historical growth rate suggests that Tata Motors has successfully capitalized on opportunities and navigated challenges within its industry, positioning itself for sustained growth and competitiveness in the market.
Valuation Metrics:
- PE Ratio: With a PE ratio of 16.93, Tata Motors is moderately valued. Investors are willing to pay 16.93 times the company’s earnings, indicating a balanced valuation.
- EPS – TTM: The trailing twelve months EPS of INR 46.15 reflects strong profitability, showcasing Tata Motors’ ability to generate significant earnings per share.
- Market Capitalization: A substantial market capitalization of INR 2,59,622 cr highlights Tata Motors’ size, investor confidence, and liquidity.
Price-to-Book Ratio (PB Ratio):
- A PB ratio of 5.82 indicates that Tata Motors is trading at a moderate premium (5.82 times) to its book value. This suggests investor willingness to pay more for the company’s net assets, potentially due to positive market sentiment or growth expectations.
Dividend Yield:
- The dividend yield of 0.21% suggests that Tata Motors offers a modest dividend payout. Investors seeking dividend income may find this aspect less appealing.
Beta (Volatility):
- A beta of 2.09 indicates higher volatility compared to the market average. Tata Motors’ stock is approximately 2.09 times as volatile as the broader market. Investors should be aware of increased risk and potential for greater returns.
Conclusion and Recommendations:
Tata Motors presents a positive investment opportunity with consistent growth across various time frames. The moderate PE ratio and substantial EPS reflect reasonable investor confidence and profitability. The large market capitalization signifies investor interest and confidence in the company’s prospects.
However, the moderate PB ratio suggests that the stock is trading at a reasonable premium, indicating balanced growth expectations and market sentiment. The elevated beta indicates higher volatility, appealing to risk-tolerant investors seeking potential higher returns.
Recommendations:
- For Long-Term Investors: Tata Motors’ consistent long-term growth makes it an attractive option for investors with a long-term horizon.
- For Risk-Tolerant Investors: Consideration of the higher volatility (beta) is crucial. Risk-tolerant investors may find the stock appealing for potential higher returns.
Profit Review
Tata Motors has demonstrated commendable financial performance, with its quarterly and annual total income figures reflecting a positive trajectory. In the most recent quarter ending in September 2023, the company reported a total income of INR 1,06,758.98 crores, showcasing a steady upward trend.
However, it’s noteworthy that the growth rate experienced a slight decline in the previous quarter (June 2023), registering a total income of INR 1,03,596.62 cr. Despite this dip, the company bounced back strongly in March 2023, recording a significant growth of 19.96%, with a total income of INR 1,07,509.28 cr.
The annual performance further emphasizes Tata Motors’ financial prowess, as evidenced by the total income growth percentages in comparison to the preceding years. Notably, the company’s annual revenue growth of 24.54% has notably outperformed its 3-year CAGR of 9.81%. This substantial outperformance underscores the company’s ability to consistently generate revenue and suggests effective strategic initiatives.
Analyzing the quarterly growth rates, the positive momentum in the last two quarters of 2022 (December) and the most recent quarter (September 2023) is particularly encouraging, indicating sustained growth and resilience. The growth percentages of 11.12% and 10.75% in December 2022 and September 2022, respectively, demonstrate Tata Motors’ ability to navigate market dynamics and capitalize on emerging opportunities.
How has Tata Motors Stock Performed in the Past Few Years
One has to analyze the overall performance of the company in the past years to assess the performance of its stocks in the share market. An estimate of just the performance of the stock for the past few months may not offer the right picture to understand how the Tata Motors stock has performed. Here’s how the stock has fared:
Historical Price Decline:
The historical data shows that, on average, there has been a price decline of approximately 10.53% within seven weeks of the Weekly MACD crossover signal over the past 10 years. This suggests that while the crossover may indicate a change in momentum, it has been followed by short-term price declines in the past.
It’s important to note that technical indicators like the MACD crossover are one of many tools used by traders and investors to make decisions. They provide valuable insights into short-term price movements but should be considered alongside fundamental analysis and other factors.
Past Few Years:
When we look at the past performance of the company we see that the share price increased by 365.63% in the last three years. We are going to understand it in steps:
Face Value: The face value is the most important thing to understand the performance of a share. This is the original price of the share and in Tata Motors’ case it was INR 2.
2018: In this year the price of the share rose to 443.50 on Jan. 9, and it did not go any further. By the end of the year, the prices came down to INR 154.
2019: The price dropped even lower and the maximum price of the share was INR 239.35 on April 22, but the prices kept on falling and as on Dec. 31, it was INR 201.70.
2020: This is the time when Covid spread worldwide and Tata’s subsidiary, JLR, got affected by it owing to dependency on China for supplies. The stock price rose to INR 197 in January as Covid-19 spread, it went into a free fall with the stock crashing down to INR 63.50 by March. This was the lowest point after which the stock picked up but was not able to cross INR 187 in the same year.
2021: It was again a tough year as the price was INR 184 in January. With most of the countries under lockdown, the Tata Motor share was recovering and was able to get back to the price of INR 536.70 by November after a few years.
2022: This year, the price rose to INR 588 on the BSE and INR 528.50 on the NSE and since then it has stayed above INR 400. The lowest price was INR 381.
Historical High: Tata Motors’ share has reached a historical high of INR 1,382 in December 2010.
Historical Low: In April 2001 this stock saw an all time low price of INR 57.55.
Dividend: Company has not announced any dividend recently. The last dividend was announced in the year 2016.
What Makes Tata Motors’ Stock Interesting?
Despite challenges posed by the semiconductor shortages worldwide that dented profits for companies, specifically in the locomotive space, across the world, the Tata Motors Group was able to record a growth of nearly 60% in sales last financial year (FY). Here are other key aspects that make the Tata Motors stock interesting:
Investment in Technology
Tata Motors has spent INR 15,339 cr on research and development operations in the financial year 2022. This is 5.5% of the total turnover the company had. This is a heavy investment for R&D and quite unlike its peers out of India.
It is a known fact that only those companies will be able to survive in the world of technology that are able to evolve and adopt new technologies. Tata as a company is also shifting its focus to the new-age technologies that are interesting for consumers. Based on their their annual report, these include:
i) Energy Transition – irreversible move to green mobility.
ii) Supply Chain Transition – rebalancing of supply chains to become resilient.
iii) Digital Transition – artificial intelligence and machine learning becoming mainstream.
iv) Talent Transition – coming of age of the talent cloud: a diverse, inclusive, global talent pool that can be accessed remotely.
The company aims to bolster its production and revenue as each of the focused investments in the field of technology reaps results.
Electric Vehicles (EVs)
EVs are the most promising segment for Tata Motors given the fact that the company enjoyed a market share of 87% for EVs in India in FY2022. This has grown by 1% in the first quarter of the financial year 2023. In the first quarter alone, Tata Motors sold 9,301 EV units with no signs of decline.
Orders:
Tata Motors has orders for the manufacturing of commercial vehicles from various State Governments in India:
- 1500 electric buses for Delhi Transport Corporation.
- 1,180 electric buses for the West Bengal Transport Corporation.
- 921 electric buses for Bengaluru Metropolitan Transport Corporation.
Delivery of these orders has already started and the company has set up charging stations throughout the country.
Charging Stations
There are over 3,600 public or semi-public chargers and more than 23,500 residential chargers throughout the country. They are planning to set up 5,000 new stations in new construction projects in the state of Maharashtra.
Foreign Investments
Tata Motors is consolidating its home base, India, and helped by an increase in liquidity amid investment by foreign companies and collaborations for India, Tata Motors no longer wants to remain listed in the American market and has delisted its American Depositary Shares (ADRs).
Tata Motor’s expansion with partners includes:
TGP investment in Tata Motors for the manufacturing of electric vehicles:
Stellantis has partnered with Tata Motors to produce automotive components and branded vehicles. Fiat also has a manufacturing plant in India with Tata Motors.
It has joint ventures and assembly operations in Kenya, Bangladesh, Ukraine, Russia, and Senegal. They have dealerships in almost all major countries.
Risks Related to Tata Motors’ Stock
Risky Investments
Tata Motors has invested a considerable amount of money in purchasing Jaguar Land Rover, and the business is yet to showcase its full potential. The company’s investment in establishing Tata Motors European Technical Centre is expected to become fruitful in the coming years, and currently requires continued investment.
The failure of Tata’s flagship low-cost car Nano is also a bad investment, the brunt of which the company has had to bear through the years.
Debt
The company had a debt of INR 57,000 cr in the third quarter-ended December 2022. The company has shown its commitment to lower its debt, and targets to pay all of it by 2024.
The company’s profits can not be the only factor to determine the strength of the Tata Motors stock given how established the automobile giant is. Profitability of a company depends on a lot of factors and here are some factors that make Tata Motors promising for shareholders.
Global Risks
Covid-19
Covid-19 was a big disaster for businesses globally and it affected the auto industry in India to a large extent. Production was lower and sales were severely affected for more than a year. Tata Motors has also had to wither its after effects.
Geopolitical Reasons
Because of the slowdown in the European economy, Jaguar Land Rover has not been able to reach its targeted sales. The semiconductor supply chain breakdown fueled by constant lockdowns in China hampered production and has led to shortages of important parts needed to scale production.
All About Tata Motors
Tata Motors, one of the pioneers of the automobile revolution in India, was established in 1958. Even in those days, there were many Indian companies in the market, but only two companies were able to retain their dominant position domestically; in fact they were also able to extend their businesses and manufacturing plants internationally. These companies are Mahindra & Mahindra and Tata Motors.
Since its inception, Tata Motors has collaborated with some of the world’s best and at the same time acquired some in the process of global expansion.
Following are the international companies acquired by them:
Products and Services by Tata Motors
Tata Motors was the first Indian company to indigenously develop automobiles for the Indian market. Before that companies were dependent on imports for the manufacture of primary components. They developed the needed technology and brought modern innovations into manufacturing.
Cars
Last year alone, Tata Motors had a line up of some of the best-selling cars in the country across the electric, luxury and SUV segments. Among their top car brands include Tata Tiago, Tata Punch, and Tata Nexon for electric, luxury cars like Jaguar Land Rover for the international and Indian markets and Tata Harrier as an SUV.
Commercial Vehicles
Tata Motors manufactures trucks, pick-ups, construction, light mining, and services vehicles. Among some most popular names is the 407 model range for trucks and Prima in the heavy-weight truck category.
Research
Tata Motors has various production facilities in India and internationally. In 2005, they set the foundation of Tata Motors European Technical Centre—an engineering and research company based at WMG, University of Warwick (UK).
Bottom Line
Despite Tata Motors shares on a rocky footing due to multiple underlying issues, the company’s stock remains one of the most trusted automotive stocks in the country. Standing on the robust foundation of its parent company, Tata Motors’ investments are forward-looking and the company has wide scope of further growth in new-age locomotives, which aligns with the interest of the federal government as well.
For investors who are looking to trade in Tata Motors stocks, it is advisable to do so by comparing peer stocks and the Auto Index along with the market indices via online aggregators or stock market advisors to make a fruitful decision.
