For the past year, TATA Motors has been a favoured stock among market enthusiasts. As of writing this column, the current price of TATA Motors stands at ₹987. Rising from its 52-week low of ₹400, the company has delivered an impressive return of approximately 139% in one year. Due to its recent increase in value, TATA Motors is a desirable addition to any portfolio, drawing interest from both experienced and fresh investors. So here we have a detailed fundamental analysis of Tata Motors for you.
TATA Motors is a significant player in the future of the automotive industry and is known as the flagbearer of India’s Electric Vehicle (EV) revolution. The company appears well-positioned for growth with robust government initiatives backing the transition to EVs. However, TATA Motors faces challenges like high debt, competitive business efficiency, diesel uncertainty, and a volatile global economic and geopolitical environment. These factors raise questions about the company’s credibility as a leading player in the segment. But don’t worry we are going to delve into the in-depth fundamental analysis of Tata Motors. It will help you to evaluate the stock and the upcoming prospects of the company in real terms. Let’s start the discussion.
About the company- Fundamental Analysis of Tata Motors
Tata Motors Ltd started its journey in 1945 under the name Tata Engineering and Locomotive Co. Ltd. Their initial focus was manufacturing locomotives and various engineering products. Three years later, in 1948, they introduced steam road rollers in collaboration with Marshall Sons (UK). Then, in 1954, Tata Motors partnered with Daimler Benz AG, West Germany, to manufacture medium commercial vehicles. By 1959, they had established a Research and Development Centre in Jamshedpur.
Today, Tata Motors Limited is a global powerhouse in automobile manufacturing. With a wide range of automotive vehicles, they also manufacture engines for industrial and marine use. As part of the massive USD 37 billion Tata Group, Tata Motors has a strong global presence, operating in the UK, South Korea, Thailand, South Africa, and Indonesia through 86 subsidiaries and associate companies. Notably, they own Jaguar Land Rover in the UK and Tata Daewoo in South Korea.
In India, Tata Motors holds a leading position in commercial vehicles. The company is among the top manufacturers of passenger vehicles, with 9 million vehicles cruising on Indian roads. With design and R&D centres scattered across India, the UK, Italy, and Korea, Tata Motors constantly endeavours to introduce new products that capture the imagination of the next generation of customers.
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News Headlines
TATA Motors Strategic Expansion Plans: Upcoming Projects
Expansion of Manufacturing Capacity in Sanand Plant
TATA Motors is gearing up for expansion, acquiring a facility from Ford in Sanand. With an annual capacity of 300,000 units, scalable to 420,000 units, the industrialization of the Sanand plant is set to commence in CY2024. The company’s investment in H1FY24 amounted to approximately Rs. 3781 crores, primarily focusing on the PV + EV segment. Estimated FY24 capex stands at around Rs. 8,000 crores, reflecting a heightened emphasis on electrification investments. Tap to read more about this expansion.
Strategic Investments in Freight Tiger
TATA Motors made significant strides by acquiring a 27% stake in Freight Tiger during H1FY24 for Rs. 150 crores. Fleet Edge and Freight Tiger integration aims to offer an end-to-end solution by integrating truck and trip ecosystems. With plans to invest an additional Rs. 100 crores in the next 2-3 years and buy out other investors by FY29, TATA Motors is poised to strengthen its foothold in the logistics sector.
Solar Power Partnership with Tata Power Renewable Energy Limited
TATA Motors and Tata Power Renewable Energy Limited (TPREL) have inked a Power Purchase Agreement (PPA) to develop a new 12MWp on-site solar project at Tata Motors’ Pune commercial vehicle manufacturing facility. This collaboration is expected to generate 17.5 million units of electricity annually, meeting nearly 17.2% of the facility’s annualized requirement and significantly reducing carbon emissions by over 12400 tonnes/kWh annually. Read more about this partnership.
Co-development of Electric Vehicles with Jaguar Land Rover
TATA Motors’ electric vehicle arm and Jaguar Land Rover are embarking on a strategic collaboration to co-develop electric vehicles. This partnership involves sharing manufacturing expertise, with the initial models scheduled for release in 2025. The company plans to integrate cutting-edge technologies into its vehicles to achieve this goal. These innovations include high-speed charging capabilities, over-the-air updates, and semi-autonomous driving features. Moreover, the electric vehicles will boast impressive performance metrics, such as a range exceeding 550 km and charging speeds up to 300 kW. Read more about Tata Motors’ EV plans getting big JLR push.
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Essentials & Financials- Fundamental Analysis of TATA Motors
Market Capitalization: TATA Motors boasts a market capitalization of ₹ 3,62,666 Crores, showcasing its substantial presence and dominance within the market. However, such a large market capitalization also raises expectations from investors, who anticipate consistent growth and performance to justify this valuation.
Profitability Ratios: TATA Motors exhibits moderate profitability. Its Return on Capital Employed (ROCE) stands at 5.95%, while the Return on Equity (ROE) is 5.62%. These figures indicate the company’s ability to generate returns from its investments and shareholders’ equity. However, higher figures are desirable. Hence, there is room for improvement.
Price to Earnings Ratio (P/E Ratio): The P/E Ratio for TATA Motors stands at 16.97, lower than its sector P/E ratio of 32.64. This indicates that the company’s stock is relatively undervalued compared to that of its peers. It may indicate investment opportunities or reflect market concerns about future earnings growth.
Earnings per Share (EPS): TATA Motors’ Earnings per Share (EPS) is ₹ 58.39, signalling positive and consistent earnings growth. A growing EPS indicates the company’s ability to generate profits for its shareholders over time, fostering investor confidence and trust in its financial performance.
Debt to Equity Ratio: With a Debt to Equity Ratio of 2.77, higher than the ideal threshold of 1, TATA Motors’ reliance on debt financing raises concerns about its financial health and risk exposure. A higher debt ratio implies a greater proportion of financing through debt, potentially impacting the company’s liquidity and overall stability.
Dividend Yield: TATA Motors’ dividend yield is 0.20%, which may appear low to investors seeking regular income from their investments. Although dividend payments give shareholders a source of income, a low dividend yield can mean that the company keeps a sizable percentage of its revenues for debt reduction or reinvestment in future growth possibilities.
SHAREHOLDING PATTERN
| Shareholders | Mar 2017 | Mar 2018 | Mar 2019 | Mar 2020 | Mar 2021 | Mar 2022 | Mar 2023 | Dec 2023 |
| Promoters | 34.73% | 36.37% | 38.37% | 42.39% | 46.41% | 46.40% | 46.39% | 46.37% |
| FIIs | 23.24% | 20.26% | 19.14% | 16.84% | 13.78% | 14.45% | 15.34% | 18.62% |
| DIIs | 15.35% | 17.50% | 16.10% | 13.42% | 11.91% | 14.38% | 17.69% | 17.25% |
| Government | 0.13% | 0.16% | 0.17% | 0.16% | 0.15% | 0.14% | 0.14% | 0.14% |
| Public | 26.56% | 25.71% | 26.22% | 27.19% | 27.75% | 24.62% | 20.41% | 17.60% |
| No. of Shareholders | 5,05,495 | 7,23,869 | 10,88,172 | 13,54,298 | 20,38,757 | 37,97,100 | 38,14,831 | 41,84,369 |
There was a significant development in the December 2023 quarter as promoters released all pledges. This resulted in a decrease in promoter pledges by 1.8200%. Additionally, there was a marginal decrease in promoter holdings from 46.38% to 46.37%, representing a decline of 0.0100%.
On the other hand, institutional investors witnessed an increase in holdings. FII/FPI holdings rose from 18.40% to 18.62%, marking a 0.22% increase. Similarly, mutual funds also saw a rise in their holdings, increasing from 9.82% to 10.37%, reflecting a 0.55% increase. Overall, institutional holdings increased from 35.91% to 36.01%, indicating a 0.1000% rise.
These adjustments to shares and pledges reflect TATA Motors’ investor structure and business plan changes.
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Evaluating Financial Statements
In the fundamental analysis of TATA Motors, it is time to discuss the important metrics of the company. Financial statements such as Income Statements, Balance Sheets, and Cash Flow Statements are crucial for analysis because they provide valuable insights into a company’s financial health, performance, and overall viability. By analyzing these statements, stakeholders can assess the company’s profitability, financial strength, and potential risks. Let’s start with the Income statement.
Profit & Loss | Income Statements
Revenue from Sales:
-In the last 5 years (March 2019- March 2023): Revenue Increased from 301,938 crores to 345,967 crores (a rise of approximately 14.58% over the last 5 years).
-TTM Revenue (March 2023 to TTM): Revenue increased from 345,967 crores to 423,874 crores (an increase of approximately 22.53% for the trailing twelve months).
Operating Profit:
-In the last 5 years (March 2019- March 2023): Increased from 24,664 crores to 31,816 crores (a rise of approximately 29.02% over the last 5 years).
-TTM Operating Profit (March 2023 to TTM): increase from 31,816 crores to 55,517 crores (increased by approximately 74.57% for the trailing twelve months).
Net Profit:
-In the last 5 years (March 2019- March 2023): Increased from -28,724 crores to 2,690 crores (a rise of approximately 109.24% over the last 5 years).
-TTM Net Profit (March 2023 to TTM): increase from 2,690 crores to 19,774 crores (a high jump of approximately 635.70% for the trailing twelve months).
The company has shown significant improvement in profitability, transitioning from a substantial loss to positive net profit over the past 5 years.
EPS:
-In the last 5 years (March 2019- March 2023): Increased from Rs -99.84 per share to Rs 7.27 per share (a rise of approximately 107.35% over the last 5 years).
-TTM EPS (March 2022 to TTM): increase from Rs 7.27 per share to Rs 58.39 per share (increased by approximately 701.66% for the trailing twelve months).
The significant increase in EPS over the past five years reflects a remarkable turnaround. It showcases the company’s financial performance, transitioning from a significant loss to positive earnings per share. This indicates enhanced profitability and financial stability over the long term.
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Cash Flows Statements
Cash flow statements show how much money a company makes and spends during a certain time. This helps us understand if the company has enough cash to pay its bills. Investors use these statements to see if the company can make money, pay off debts, and grow. Also, cash flow statements help predict how much money a company might have in the future, which helps with planning and making financial decisions.
Cash flows from operating activities: From March 2019 to March 2023, the company has recorded a substantial rise in Cash flows. It increased from 18,891 crores in March 2019 to 35,388 crores in March 2023.
The increased operating cash flows signify financial strength and stability, positioning the company well for future growth and investment opportunities.
Net cash flow: Over a period of 5 years, Net cash flow has been fluctuating. The figures declined from 13,232 crores in March 2021 to -6,272 crores in March 2023. This indicates potential challenges in cash management and financial performance.
This shift from positive to negative net cash flow suggests increased cash outflows relative to inflows, requiring further analysis and strategic adjustments.
Comparison Between Income Statements And Cash Flows Statements.
In the fundamental analysis of TATA Motors, let’s take our analysis one step ahead by comparing the Income and Cash Flow statements. We have an important implication of comparing the operating cash flow from the Cash Flow Statement with the net income from the Income Statement. This helps assess the quality and sustainability of the company’s earnings.
In an ideal scenario, Cash Flows from Operational Activities are generally preferred to exceed the Net Income. This indicates a robust and healthy growth outlook for the company. In the case of TATA Motors, in March 2023, the Net profit stood at 2,690 crores while the Cash flow from operating activities stood at 35,388 crores in the same period. This suggests strong operational efficiency and potentially sustainable earnings for TATA Motors.
TATA Motors Ltd Peer Comparison
| Company Name | Price | % Chg | MCap(Cr) | TTM PE | P/B | ROE(%) | 1 Yr Perform(%) | Net Profit(Rs.) | Net Sales(Rs.) | Debt to Equity |
| Tata Motors | 986.40 | 0.79 | 327,805.54 | 16.90 | 7.25 | 5.32 | 145.62 | 2,353 | 345,966 | 2.77 |
| Eicher Motors | 4,002.55 | 2.27 | 109,590.14 | 28.57 | 7.31 | 19.43 | 40.32 | 2,598 | 14,442 | 0.01 |
| Tata Motors DVR | 650.20 | 0.38 | 33,062.86 | 1.70 | 4.78 | 5.32 | 220.93 | 2,353 | 345,966 | 2.77 |
Highlights Of Earnings and Revenue- Annual/Quarterly-Fundamental Analysis Of TATA Motors
As we move to our final discussion of the fundamental analysis of TATA Motors, let’s highlight the earnings and revenues of the company over the past 1 year. In the past year, TATA Motors saw a robust growth in annual revenue, increasing by 24.54% to ₹350,600.15 Crores. The annual net profit surged by 121% to ₹2,414.29 Crores. Additionally, TATA Motor’s stock price exhibited a remarkable rise of 138.41%, outperforming its sector by 54.07%. The share price soared from Rs 401.7 to Rs 987.0, marking a substantial gain of 585.3.
Furthermore, quarterly revenue experienced strong growth of 24.96% year-on-year, reaching ₹112,075.94 Crores, with quarterly net profit surging by 137.52% year-on-year to ₹7,025.11 Crores.
TATA MOTOR’s earnings per share for the last quarter were 18.30 INR whereas the estimation was 13.17 INR, accounting for a 38.93% surprise. Company revenue for the same period amounts to 1.11 T INR despite the estimated figure of 1.09 T INR. Estimated earnings per share for the next quarter are 18.39 INR, and revenue is expected to reach 1.21 T INR.
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Let’s Wrap It Up the Fundamental Analysis of TATA Motors
In conclusion, the fundamental analysis of TATA Motors indicates the company’s overall good health. The significant increases in annual revenues, net profit, and substantial rise in share prices reflect its robust growth. Additionally, TATA Motors has shown positive earnings per share (EPS), a fair price-to-earnings ratio, and growing interest from institutional investors over the past year. However, the slightly high debt-to-equity ratio raises some concerns. Nonetheless, as a market leader and a pioneer in the EV revolution in India, TATA Motors remains fundamentally strong. The endeavour of the esteemed TATA group is poised for continued growth in the future.
That’s all for today’s post. Hope you get some valuable insights from here.
Happy reading!
Disclaimer
The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a period of time. The post does not consist of any direct recommendations about investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfil their personal responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.
