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Reasons why to watch Tata Motors stock | Yadnya Investment Academy

Reasons why to watch Tata Motors stock | Yadnya Investment Academy

Published on 21 May 2021 Views 174 Comments 0

Tata Motors has announced their Q4FY21 results on Tuesday 18th May 2021. The Company performed well in terms of revenue but reported a loss in the last Quarter of FY21 in a consolidated business. Post-Result Tata Motors stock price has corrected significantly. At this point, What should a long-term investor do? Read this blog, to know about the factor to look out for Tata Motors from the current stand of the business.

Introduction:

Tata Motors Limited is an Indian multinational automotive manufacturing company. Recently the company announced its Quarterly Results for Q4FY21 where the company faced a heavy loss of Rs. 7,605 Cr. The major reason behind this loss was writing down the assets for its subsidiary company. Let’s read out the factors available to watch out for Tata Motors post this quarterly result.

Tata Motors Results:

  • Tata Motors results are out which is showing a huge amount of losses. The total loss of the consolidated business of Tata Motors in Q4FY21 was Rs 7605 Cr.
  • In FY 2018-2019, Tata Motors booked the consolidated loss of Rs. 29,000 Cr. The major reason behind this was that the Company took Impairment Loss in China, which was quite huge.
  • Then, in FY2020 also company reported a loss of Rs 12,000 Cr. And in FY21 loss was seen of Rs. 13,451 Cr.
  • How the company was presenting and acting on their plans has brought the stock price from Rs 60 to Rs 300 and above.

Reasons about Tata Motors on Radar:

i) Enhancement Domestic Business:

a) Market Share

  • One needs to keep watch on how Tata Motors' domestic business is enhancing.
  • Also, the consistency in market share gain, profitability of the company is performing very well.
  • In FY21, where the commercial vehicle market was impacted very badly. At that time the market share of Tata Motors was 42.4%.
  • Even though the consolidated result showed was in red figures for Tata Motors. But standalone company results were in profits. That was a positive sign.
  • The company’s Passenger Vehicle market share in the last quarter was 8.2% in FY21. Whereas In FY20 the market share was 4.8%.

b) Safety Viewpoint:

  • The market share has shifted toward Tata Motors-like companies due to buyer’s awareness about safety. On the other hand, Maruti is a loser in acquiring its market share due to its low safety rating as compared to Tata Motors.
  • Due to renewed interest in buyers, this could be a positive sign for Tata Motors.

c) Continued Momentum in Electric Vehicle:

  • In this space, Tata Motors has taken a big first-mover advantage.
  • In the new sales of EV, Tata Motors has gained a market share of 60%-65%. As there is very little competition in this market, as of now.
  • In the coming time, with other competitors Company may enjoy the benefit of first-mover advantage and hence can keep a healthy double-digit market share.
  • The ecosystem that they are planning to build with Tata Power to build charging stations is also going in the right direction.

ii) Debt Reduction Plan:

  • The company is planning to be debt or net debt-free in the next 3 years.
  • In the Last 4 to 5 years there was only 1 year i.e., FY16 where the company’s borrowing has lowered down. Rest of the year the borrowing has increased.
  • Currently, the borrowings of Tata Motors is around Rs. 1.2- Rs.1.3 lakh Cr. It is important for the company that this Borrowing should be brought down.
  • It is hoped that there won't any more spending on JLR restructuring as it was given 2.5 billion Pound initially.
  • They are also having a cost-saving plan which is on right track. Hence there cash flow is also on track.
  • If the company could make itself debt-free in the next 3 years then it will be a big boost.

iii) JLR Re-Image Strategy:

  • In this strategy, the company is more focused on electric vehicles.
  • The company has made an asset write-down worth Rs 15000 Cr. i.e. around 1.5 Billion Pound was done.
  • This write-off was done in January 2021.

Conclusion:

It is doubtful that the company could be debt-free in the next 3 years. Even if they reach near to it. This could be a great boost. The investor who is going to believe in their long-term vision should only invest. That is going to decide the future trajectory of the company. Do proper research and study before investing.

 

 

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