Experts expect the stock to start its northward journey again, but caution that the pace may not be similar to that seen a year-and-half back
The shares of Tata Motors and Tata Consultancy Services – both flagship companies of the Tata Group – have moved in opposite direction in the last one year. While TCS rallied 69 percent from its 52-week low, Tata Motors has fallen 45 percent from its 52-week high.
Despite the sharp fall in the commercial and luxury vehicle maker, most experts still continue to hold Tata Motors in their portfolio. They don't see any major need to pare exposure to the stock.
Geography-wise, there are major concerns to Tata Motors’ main revenue driver Jaguar-Land Rover (JLR), but its domestic business have been lending support due to new passenger vehicle launches and increasing demand in the commercial vehicle segments.
Vineeta Sharma, Head of Research, Narnolia Financial Advisors, said Tata Motors has witnessed multiple global headwinds in the last 2 years. “Currency headwinds, a US-China trade war, loss of sales on account of reduction in import duty in China and softening of US car market have had a bearing on its global auto sales numbers.".
Sumit Bilgaiyan, Founder, Equity99, feels JLR volumes can continue to remain muted due to headwinds in major markets like the UK, Europe and to some extent the US.
Despite these global challenges, which hammered the stock so badly, experts now find the stock attractive for the long term. They expect the stock to start its northward journey again, but caution that the pace may not be similar to that seen a year-and-half back.
The recent 2.61 crore share block deal around Rs 255.8 apiece by Tata Sons shows the management’s confidence in future growth. Previously, Tata Sons had bought shares worth Rs 670 crore on August 13 and August 20, respectively. This is the third such transaction in the last 14 months. These transactions have raised Tata Sons’ holding in the auto manufacturer to 33.40 percent from 25.22 percent in 2015. "Purchase of close to a percent stake by the promoter indicates confidence of the management in the future of the company and comfort at current valuations," Anita Gandhi, Whole Time Director, Arihant Capital Markets, said.
Majority of experts find the stock at attractive levels and see it rallying up to 60 percent from current levels.AK Prabhakar, Head of Research, IDBI Capital
Tata Motors remains a cheap stock in the auto space due to multiple reasons. The management seems to have addressed most of these concerns in its recent analyst presentation. If they can start to deliver, then the stock can outperform. An upside of 10-15 percent looks possible in 5-6 months.Anita Gandhi, Whole Time Director, Arihant Capital Markets
Current valuations are quite attractive. Any improvement in JLR margins going forward will lead to renewed interest in the stock. It has the potential to return 20-25 percent from current levels, if JLR margins improve.Sumit Bilgaiyan, Founder, Equity99
Domestic CVs and PVs are likely to deliver healthy double-digit volume growth driven by new models launches and distribution expansion. We have a positive outlook on the stock with target price of Rs 400 per share.Vineeta Sharma, Head of Research, Narnolia Financial Advisors
The only positive working for Tata Motors stock right now is its attractive valuation. A re-rating would require improvement in JLR’s performance. We have an accumulate rating on the stock with a target price of Rs 290 per share.Astha Jain, Senior Research Analyst, Hem SecuritiesWe see more correction in the counter going forward due to continuous weakness in its financial performance. Hence, we advise investors to wait and make a fresh entry in the stock anywhere between Rs 200 and Rs 220 per share for the long term.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are his own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.