Tata
Motors Limited (TTM, $41.51): “Tata Motors: Growing with India”
By:
Matt Ogren, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Tata Motors Limited (NYSE:TTM) is India’s largest automobile
company. TTM provides automobile
products consisting of commercial and passenger vehicles. They also engage in a
handful of related ventures. Included in this is engineering and automotive
solutions, construction equipment manufacturing, and automotive vehicle components
manufacturing, just to name a few.
•Announced September 21,
Tata has entered into a new Strategic Partnership Agreement with longtime ally
and lubricant giant, Castrol.
• During Q2, Sales
of Medium and Heavy
Commercial Vehicles (M&HCV) grew by 7.8% Y-o-Y while the Light Commercial
Vehicles (LCV) segment grew by 11.6% Y-o-Y
• Earlier this month, TTM announced having received orders for over 5,000 buses
from 25 City/State Transport Undertakings across the country.
• A 9% growth in Q2 sales
by Jaguar Land Rover did not translate to higher profits as the Brexit vote
hurt European currency value.
Key
points: Tata Motors Limited is a company that continues to evolve
within the forward thinking and technology crazed automotive industry. The
India based manufacturing company continues to see strong growth across a
variety of its segments.
As AIM alumni Ryan Bailey
foresaw when he pitched TTM in the fall of 2013, we have seen a major
investment in ground transportation across India. For example, the commercial
vehicle segment has been a major asset for Tata Motors within the last few
years. They have seen growth across the board, especially in the small
commercial vehicle space where they corner the Indian market. The Tata Ace had
its tenth birthday last year and considering it is currently India’s number one
mini truck, there was much to celebrate. In fact, the Ace now owns 85% of the
segments market share and accounts for 20% of all commercial vehicles within
India.
On the other hand, the
government is also shelling out money for investment in new high tech buses
that will include such things as GPS, onboard Wifi and electronic destination
boards. After multiple years of relatively low investment, it was announced on
Sept. 6 that Tata will be filling orders for over 5000 buses from over two
dozen STUs. The big surge has been a good indicator
of government investment in public transportation.
Although there has been a lot of good news as of late, Tata Motors has also had to deal with some adversity. The company added Jaguar Land Rover (JLR) in 2008 as a subsidiary. The segment has done well and was acquired to help diversify their vehicle offering. Unfortunately, the subsidiary is based in the U.K. and the recent turmoil in Europe has negatively affected profits. Despite a 9% growth in Q2 sales, JLR did not see higher profits with a major factor being the Brexit vote hurting European currency value.
Although there has been a lot of good news as of late, Tata Motors has also had to deal with some adversity. The company added Jaguar Land Rover (JLR) in 2008 as a subsidiary. The segment has done well and was acquired to help diversify their vehicle offering. Unfortunately, the subsidiary is based in the U.K. and the recent turmoil in Europe has negatively affected profits. Despite a 9% growth in Q2 sales, JLR did not see higher profits with a major factor being the Brexit vote hurting European currency value.
What
has the stock done lately?
TTM stock currently sits
at $41.51 dollars a share. The price peaked at $44.79 during the first week in
September. This price surge took place after Tata reported strong August
numbers and coincided with the good news about Tata obtaining the government
bussing orders. Since then, the price has dropped back towards its value at the
beginning of the month.
Past
Year Performance: Tata has increased by over 75% in value
compared to this time last year. The company’s stock price spent much of the
last year in the mid-$20’s to low $30’s price range before breaking out this
summer and it currently resides at over $40 a share. Despite a small setback
when Brexit hit, TTM saw continued upward momentum before stagnating this
month.
Source:
FactSet
My
Takeaway
Tata has seen good
performance from both its operating segments and stock price over the last
twelve months. There are sure to be some bumps along the way but the company
has been moving in the right direction and still has room to grow. The ideal
placement in the growing country of India and the macroeconomic tails winds
will be helpful to the company moving forward. It is unlikely we will see the
stock price grow by over 75% within the next year, although more modest gains
are quite feasible.
Source:
FactSet
