Tata Motors shares gain 52% in January so far; analysts think it remains a long-term bet

"The stock is still trading at half the price from its peak levels, so investors having a long-term perspective should still hang on, while traders should look to book profits as sharp swings are expected in the near-term," said Navneet Daga, Senior Derivatives Analyst – Institutional Equities, YES SECURITIES.

Days ago, the company launched the i-Turbo petrol variant of its premium hatchback Altroz at an introductory price increment of Rs 60,000 above the existing petrol variants of the model.

It has also announced price hikes of its passenger vehicle range. Rising input costs and material costs of steel, precious metals and semiconductors have compelled the company to pass on a part of the cost to customers, the company said in the release.

Owing to signs of economic recovery, analysts believe the automobile sector is poised for gain. Tata Motors, being one of the prominent players of the segment, is likely to see tailwinds.

Moreover, the company's emphasis on cost-control has helped it in gaining operational efficiency while boosting cash flows.

"The relentless focus on cost-control helps the company gain operational efficiency and enhance free cash flows. It enables the company to deliver more than the consensus in its QoQ balance sheet performance, the primary factor fueling the rally," said Ashis Biswas, Head of Technical Research at CapitalVia Global Research.

"Seeing the management focus on innovation and consistent action and plan to provide the best customer satisfaction, Tata Motors can consider India’s Tesla with a lighter note," said Biswas.

Umesh Mehta, heads of research at SAMCO Group, pointed out that the stock has zoomed at full speed over the past trading sessions thanks to better-than-expected sales numbers from the Jaguar Land Rover (JLR) division, which saw a strong demand coming from China for the quarter.

Another major boost for the stock, as per Mehta, came from the news stating that Tesla will be seeking a partnership with Tata in setting up their India operations.

"With Tesla being synonymous with next-gen EVs, a partnership can significantly improve Tata Motors’ prospects multi-fold and this drove investors to jump into the stock. While nothing has been confirmed by either Tata or Tesla, investors are willing to place their confidence and bets with hopes of benefitting from this association if it comes to fruition," said Mehta.

Global research firm CLSA has retained a buy call on the stock with a target price of Rs 290. It is of the view that building the confidence of a turnaround could lead to a valuation re-rating.

CLSA said that the buy rating is premised on expectations of a turnaround at JLR and India business. It is conservative on its valuation relative due to its underperformance in the last five years.

Resultant bull case valuation (Rs 500) implies 104 percent upside from current levels, it added.

Last week, the company said it has received 98 patents in 2020 under its accelerated drive for engineering excellence and innovation which indicates that the company does not want to lag on the front of technological advancement.

These patents predominantly relate to the megatrend of CESS (connected, electrified, sustainable and safe) automobiles.

The company is to announce its December quarter earnings on January 29 wherein the company's India business outlook, including market share gains in the PV segment, recovery trends in the CV segment, demand recovery trends at JLR and the impact of Brexit on manufacturing will be in focus.

The earning numbers and management commentary will decide the course of the stock in the near-term.

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