Tata Motors Group, is a leading automobile manufacturer with a portfolio that includes a wide range of cars, sports vehicles, trucks, buses and defence vehicles. Their marque can be found on and off-road in over 175 countries around the globe.
Tata motors is among the top valuables automobile companies of India in terms of their market capitals. JLR is one of the most important business of Tata motors which is the attraction of company. However, in last few years, company has not been able to make its domestic business also attractive.
During 2015, whereas its competitors were gaining the market share with double digit growth, tata motors was reporting subdued growth. Even now, when auto sector is on rapid growth stage, tata motors in last many quarters has reported only losses and losses in its domestic business. Company has a Sales CAGR of just 5 percent of last 10 years as compare to 10–20 percent of its peers. In terms of margin also, company has not been able to achieve a sustainable margin.
However, if take a look at consolidated numbers, than we would find that JLR has supported the stock a lot in last few years. In consolidated numbers, sales volume Growth (CAGR) stands around 25 percent of last 10 years and 10 percent in last 5 years.
So, overall it can be concluded that in past few years, less focus on Domestic market has caused losses and poor performance of Domestic business. However in recent time, company has now started focusing on strengthening their Domestic business also with the ongoing developments in their International businesses to improve its performance at consolidated level.
In last few quarters, tata motors has launched various passenger vehicles like Tiago, Nexon, etc to expand its portfolio. Company is also trying to expand its Commercial vehicle segment with new launches. For Electrical vehicle segment also, Tata motors seems a well established player to grab the opportunity.
Now, coming to valuations, I would say Tata motors really gives you a comfort level at current levels of Rs 305. Book value of company is around Rs100 per share( most Fluctuating one). On consolidated level, company is earning good amount of profit which lowers the risk. From domestic business, company had reported a total turnover of Rs16,000 crore in last Quarter ended on December 2017 which is quite attractive. Management is also confident on its growth in Passenger vehicle segment in FY19.
So, overall i think Tata motors is a good stock for buying at as Company looks very strong and confident on it growth. The price at which Tata motors is currently trading also looks quite attractive. However, as of now, only problem or resistance for the stock is Negative Cash Flow of company. But I think by looking at the potential of tata motors, it still looks a great buy. If the management really achieved in future what they are saying now, then I think level of Rs 650 wouldn’t be a so big target for stock which could be achieved in FY19.
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