Tata Motors Stock Surges to 500: What’s Driving the Bull Run and How to Profit from It

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Tata Motors Stock: The Key Factors Behind the 500 Breakout and the Roadmap to 1000

Tata Motors, one of the leading auto companies in India and the owner of Jaguar Land Rover (JLR), has seen its stock price surge to 500 on May 8, 2023, marking a 52-week high1. The stock has recovered by 9% from its 52-week low of 366.05 hit on May 12, 20222. The stock has also outperformed the benchmark Sensex, which has risen by about 13% in the past one year. What are the factors behind Tata Motors’ stock rally and how can investors profit from it? Let’s find out.

Strong Domestic Demand

One of the key drivers of Tata Motors’ stock performance is the strong domestic demand for its vehicles, especially in the commercial vehicle (CV) and passenger vehicle (PV) segments. The company has witnessed a robust recovery in sales after the pandemic-induced slowdown in 2020, driven by factors such as increased infrastructure spending, improved freight availability, pent-up demand, new product launches, and market share gains. The company sold 1.67 lakh units of CVs and PVs in the fourth quarter ended March 31, 2023, registering a growth of 61% year-on-year and 21% quarter-on-quarter3. The company also reported a market share of 40.4% in the CV segment and 9.4% in the PV segment as of March 20233.

JLR Turnaround

Another factor that has boosted Tata Motors’ stock performance is the turnaround of its British luxury car unit JLR, which contributes about 80% of its revenues. JLR has reported a strong recovery in sales and profitability in the past few quarters, driven by factors such as cost-cutting measures, product mix improvement, pricing power, and higher demand from China and other key markets. JLR sold 1.24 lakh units of vehicles in the fourth quarter ended March 31, 2023, registering a growth of 12% year-on-year and 53% quarter-on-quarter3. JLR also reported an EBITDA margin of 15.8% and a free cash flow of £729 million in the fourth quarter3.

Positive Outlook

The outlook for Tata Motors and its stock price remains positive, as the company is expected to benefit from the favorable demand-supply dynamics, new product launches, lower debt levels, and higher exports. The company has launched several new models in the domestic market, such as Safari, Altroz iTurbo, Tiago XTA, Harrier Camo Edition, and Nexon EV. The company has also reduced its net automotive debt by Rs 7,600 crore to Rs 40,900 crore as of March 20233. The company aims to achieve a net debt-free status by FY243. The company has also increased its exports by 27% year-on-year to 78,000 units in FY233.


How to Profit from It

Investors who are bullish on Tata Motors’ stock can profit from it by buying it at the current levels or on dips. The stock is trading at a reasonable valuation of about 12 times its FY23 estimated earnings, which is lower than its peers such as Maruti Suzuki and Mahindra & Mahindra. The stock also has strong technical momentum, as it has broken out of the 500 resistance level and is trading above its 50-day and 200-day moving averages. The stock has the potential to reach 1000 in the next 12 months, as per some analysts. Investors can also use stop-loss orders to protect their profits and limit their losses in case of any adverse market movements.

Conclusion

Tata Motors is one of the top performers in the auto industry, as it has delivered strong growth and share performance in the past year. The company has benefited from lower raw material costs, higher demand from the auto sector, improved product mix and pricing power, and increased exports. The company has also turned around its JLR unit, which has contributed to its profitability and cash flow. The outlook for the company and its stock price remains positive, as it has several growth drivers and competitive advantages. Investors can profit from Tata Motors’ stock rally by buying it at the current levels or on dips and using stop-loss orders to manage their risk.


  • Disclaimer: I am not a SEBI registered investment advisor and the views expressed in this blog post are for informational purposes only. Please consult your financial advisor before making any investment decisions.


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