Tata Motors- Stock Analysis

Created on 24 Jun 2019

Wraps up in 3 Min

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Updated on 11 Sep 2022

Tata Motors Limited, incorporated on September 1,1945headquartered in Mumbai, it was formerly known as TELCO, and its parent company is Tata Group. It is a leading global automobile manufacturer of cars, utility vehicles, buses, trucks and defense vehicles.

It was the first Indian automobile company to list on the New York Stock Exchange.

The Company operates in the UK, SouthKorea, Thailand, South Africa, Indonesia, Austria and Slovakia through a strong global network of 97subsidiaries and 9 associate companies, 4 Joint Ventures(JVs) and 2 joint operations, including Jaguar Land Rover(JLR) in the UK and Tata Daewoo in South Korea.

What’s good?

Tata motors have a high Brand Equity. The company is an undisputed leader in the Commercial vehicle segment having a market share of more than 43%. It is also the world’s fourth-largest truck manufacturer and the second-largest bus manufacturer. With its remarkable innovation and research and development, TML has launched excellent cars like Tiago, Nexon, Zest. The company also has a good distribution network through 835car showrooms and 45 CV outlets.

Industry Analysis

The company is operating in the fast-changing industry, the business needs to spend a lot in R&D and innovate continuously to cater to the changing preferences. Unpredictable government policies such as environmental norms, fuel prices regulation, etc. put pressure on the company to introduce compatible products and adopt the changing environment to sustain the market share.

Business Analysis

Tata motors is a 45-billion-dollar organization. Its diverse portfolio includes an extensive range of cars, sports utility vehicles (SUV), trucks, buses, and defense vehicles. The company's segments include automotive, and others, which include IT services, construction equipment manufacturing, machine tools, and factory automation solutions, high-precision tooling and plastic and electronic components for certain applications, and investment business.

The company's manufacturing plants are situated at Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Dharwad (Karnataka) and Sanand (Gujarat). Through their subsidiaries and associate companies, the company has operations in the UK, South Korea, Thailand, and Spain. It offers its products under the Tata, Daewoo, Fiat, Jaguar, and Land Rover brands.

Management Analysis

The company is managed by a very reputed TATA group. This association provided opportunities to expand business in different parts of the world. Management has built a really solid business over the years with more than 73 years of experience in the Automobile Industry, TML has developed extensiveR&D capabilities through merger, acquisition, and joint venture with global OEMs for cutting Edge technology. The management has successfully positioned the company with its vast experience and innovative policies.

Valuation Analysis

The company’s sales are turning into cashflows, but due to substantial depreciation and amortization expenses and accounting adjustment on the JLR division, the company has reported a substantial net loss. The highest quarterly loss reported by the company. The diminishing sales in the Chinese market and huge consolidated loss with negative FCFF created intense selling pressure for the stock.

Automobile company requires huge initial capital investment, so the books of accounts show significant depreciation. We have measured the industry by EV/EBITDA as it measures the return a company generates its investment and strips out the effect of fixed costs like depreciation and interest. Consequently, we came around the valuation that the company has an attractive price.

Read the Complete Research Report for complete knowledge about the company.

Disclaimer- For informational purposes only not an Investment advise.
Disclosure- The Author has recommended the stock to the clients of finology ventures pvt. ltd.
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