Tata Motors gains 9%, 14% away from its 52-week high

Tata Motors stock advances 33% in one month giving it a nine-month high at Rs 170 whereas today it gained 9 percent in trade and gained an intra-day high of 173.50 making it just 14% away from its 52-week high.

Shares of Tata Motors were trading higher for the third straight day on Wednesday and went up 9.49 percent on the BSE. The stock of the Tata Group commercial vehicles manufacturer was trading at its highest level since February 17, 2020. In the past month, it outperformed the market by surging 33 percent, as compared to a 10 percent rise in the S&P BSE Sensex.

Tata Motors reported a healthy operational performance in July-September (Q2FY21). Consolidated margins were at 12.5 per cent amid a return to the double-digit margin in Jaguar Land Rover (JLR) at 11.1 percent and EBITDA (earnings before interest, taxes, depreciation, and amortisation) breakeven in India passenger vehicles business.

Delivery on cost and cash savings in JLR and Indian operations was key to the healthy margin performance. The company posted free cash flow (FCF) of Rs 6,700 crore against negative Rs 2,500 crore in Q2FY20. As a means to reduce the automotive debt, they reiterated commitment towards turning sustainable FCF positive. ICICI Securities said in result update.

The UK government plans to ban the sale of petrol and diesel vehicles from 2030 onwards, according to media reports. Tata Motors who owns JLR has a substantial presence in the UK. Preponing of the ban on the sale of petrol & diesel vehicles in its home market will lead to the further quickening of the pace of portfolio change.

An analyst at HDFC Securities said in the company update, “We upgrade Tata Motors to BUY (ADD earlier) as the OEM will benefit from an improving demand outlook, cost-cutting initiatives, and better FCF generation. JLR’s retail volumes are improving from COVID-19 lows, and system inventories are normalising. We are building in double-digit volume growth at JLR over FY22/23E (12/11 per cent). The luxury OEM has turned FCF positive (+GBP 463m in 2Q), a trend which we expect would sustain over FY22/23E.”

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