A low base notwithstanding, sales have continued to improve regularly over the last few months with improved economic activities, and analysts are optimistic on forward prospects too
News flows around Tata Motors Ltd remain positive. The company recently announced the lining up of Jaguar Land Rover's (JLR) first electric vehicle in India, and also completed the sale of its defence business to Tata Advanced Systems Limited. The automaker also impressed with its sales volume growth during March. The company’s commercial vehicles sales, that matter the most, marked a strong rebound, boosting sentiment around the stock further.
A low base notwithstanding, sales have continued to improve regularly over the last few months with improved economic activities, and analysts are optimistic on forward prospects too. The company’s passenger vehicles segment is also catching pace, posting strong volume growth.
The company’s total CV sales grew 470% year-on-year during March, though helped by a low base. For the January- March quarter, total CV sale grew a strong 56% year-on-year, and this is bound to improve investor confidence further.
“Overall, for MHCV, industry volumes for FY21 are down 30% y-y and we estimate demand to recover and maintain MHCV volume growth of 85%/25% in FY22F/FY23 respectively" said analysts at Nomura Research.
Peer Ashok Leyland too impressed with better-than-expected MHCV volumes (11% ahead of Nomura’s estimates during March, even though they declined on y-o-y basis).
For Tata Motors, analysts at Motilal Oswal Financial Services Ltd estimate 36% growth in CV volumes and 56% in PV volumes for FY22.
Armed with such positive cues, the company continues to focus on market share gains both in the PV and CV segments, led by competitive launch. The company plans to double-digit Ebitda in CV and high single-digit Ebitda in the next three years. It plans to achieve a free cash flow break-even by FY23 and retain leadership in the electric vehicles business.
Analysts at Prabhudas Lilladher, in their note in March, had said that sharp focus on execution, both in CV and PV business, will help drive strong operating performance in the company’s standalone business.
However, fresh concerns over the second wave of the covid-19 pandemic and subsequent restrictions imposed by authorities, may keep the Street watchful, say analysts. The stock has gained five fold over past one year. However, it is down more than 2% on Monday as strict measures announced by state governments to curb the pandemic has dampened overall market sentiment.