At current market price, Tata Motors is attractively priced. We are bullish on this counter for a longer term horizon of 2 -3 years but do not rule out subdued performance in the next 2 quarters.
On Monday Tata Motors dipped 4 percent to Rs 341, extending Friday’s 0.4percent decline on the BSE. In the past three months, the stock has lost about 20 percent. With JLR still to regain its lustre and projected earnings per share at Tata Motors falling 38 percent since January 2017.
JLR’s retail volumes dropped 8 percent in March, paced by 16-26 percent lower UK and Europe dispatches and moderating sales of its old models. Recently launched E-Pace and Velar reported traction but could not offset the decline in sales of JLR’s older models. age impact is showing on Range Rover, Range Rover Sports and Evoque.
In March, the old models saw a sharp volume contraction of 23 percent. The more worrisome part of volume growth is that ageing appears to be visible in much younger models such as F-Pace and Discovery Sport, which too started to show double-digit volumes decline.
According to PTI report, Tata Motors-owned Jaguar Land Rover (JLR) is planning to cut jobs as it scales back production at some of its UK sites amid what it termed as "headwinds" impacting the automotive industry.
In past six trading sessions, shares of Tata Motors was down 6 percent after the company said that sales of JLR dropped 7.8 percent to 83,732 units in March 2018 over March 2017.
Felix Brautigam, Chief Commercial Officer, Jaguar Land Rover said that weaker market conditions in the UK and Europe, driven by lack of consumer confidence and lower demand for diesel, are impacting growth.
Tata Motors reported 35 percent increase in total sales to 69,440 units in March as compared to 51,309 units in the same month last year. Cumulative domestic sales of the company for the 2017-18 stood at 5,86,639 units, up 23 percent, over 4,78,362 vehicles sold in 2016-17.
Domestic sales of Tata Motors' commercial vehicles grew by 37 percent to 49,174 units in March, as compared to 35,876 units in the same month previous year. "This growth was on the back of government's push towards infrastructure development, restriction on overloading, road construction and mining activities along with increasing demand from e-commerce & FMCG applications," Tata Motors said in a BSE filing.
Sales of passenger vehicles in the domestic market grew 31 percent to 20,266 units last month on the back of increasing demand of Tiago and Tigor, along with Nexon and Hexa gaining traction in the steadily growing UV segment, it added. Exports during the month went up by 17 percent at 6,443 5,836 units.
Going forward, we expect wholesale volume growth of 6-8 percent in FY19. The wholesale volume growth in FY18 stood at 6 percent has been the lowest since 2013 and nearly half the volume growth CAGR in the past five years.Disclaimer
: The author is Vice-president, Equity Research at Ajcon Global Services. The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.