Tata Motors vs Bajaj Auto: Which auto stock should you bet on for long-term? Here’s a 5-point analysis

  • Tata Motors vs Bajaj Auto: The two auto giants recently dropped one spot below in their respective mcap rankings over competition from Mahindra & Mahindra

Nikita Prasad
Published21 Jun 2024, 08:51 PM IST
Tata Motors vs Bajaj Auto: The two auto majors face fresh competition from M&M and soon-to-listed Hyundai Motors India. Photo: Mint
Tata Motors vs Bajaj Auto: The two auto majors face fresh competition from M&M and soon-to-listed Hyundai Motors India. Photo: Mint

Tata Motors vs Bajaj Auto: Leading Indian auto majors Tata Motors and Bajaj Auto have received bullish upgrades on their respective stocks from domestic brokerage firms after investors recently renewed their buying interest in the last few sessions. The two companies face fresh competition from Mahindra & Mahindra (M&M) and soon-to-be-listed Hyundai Motor India. Recently, Tata Motors lost its spot as the second-largest auto manufacturer in terms of market capitalization (mcap) to M&M, among the listed companies on D-Street.

The Nifty Auto index settled 0.69 per cent lower at 25,092.30 on Friday, June 21, against the domestic benchmark Nifty 50 which closed 0.28 per cent lower at 23,501.01 succumbing to profit booking after hitting all-time highs. However, the frontline indices locked in a third straight week of gains powered by a rally in financials and the return of foreign investors.

Also Read: Tata Motors Q4 Results: Net profit jumps over 3-folds on robust demand, JLR revenue up 11% YoY; 5 key highlights

The Nifty's 0.15 per cent rise this four-day week was less than the 0.75 per cent it rose last week and its 3.37 per cent surge the week before. The index traded in a sub-300 point range for the second week in a row. The small- and mid-caps were muted on the day, but also rose for a third straight week.

‘’Nifty has been struggling to maintain levels above 23,600, although it remains steady above the support zone indicated by moving averages. We recommend focusing on selective stock picking during this period and using it as an opportunity to accumulate high-quality stocks. Besides domestic factors, global market performance will also be closely watched in the absence of any major events,'' said Ajit Mishra – SVP, Research, Religare Broking Ltd.

1.Tata Motors vs Bajaj Auto: Share Price Trend

On Friday, shares of Tata Motors opened at 979.90 and hit an intra day high of 981.00 against a 52-week high mark of 1,065.60 on the BSE. Shares of Tata Motors settled 1.74 per cent lower at 961.05 apiece on the BSE. In the last one year.

Shares of Bajaj Auto opened at 9,685 and hit an intra day high of 9,725 against a 52-week high mark of 10,037.30 on the BSE. Shares of Bajaj Auto settled 0.59 per cent lower at 9,575 apiece on the BSE. Bajaj Auto has given multibagger returns to investors in the last one-to-three year time periods. 

According to Trendlyne data, Bajaj Auto has given 8.95 per cent returns in the last one month, 11.19 per cent in the last three months, 50.87 per cent in the last six months, and 105.97 per cent returns in the last one year. In the last three years, Bajaj Auto has given 130.43 per cent returns to investors.

Also Read: RBL Bank vs DCB Bank: Which bank stock should you buy for long-term? Here's a 5-point analysis


2.Tata Motors vs Bajaj Auto: Technical Analysis

Bajaj Auto launched E-3W in Q3FY24 in certain markets, where it has become one of the leading players aided by its strong brand value. E-3W profitability is on par with ICE powertrain, while the path towards profitability for e-scooters will be gradual. The management aims to gradually scale up the production of Triumph to ~10,000 units/month (currently at ~6,000 units/month).

Domestic brokerage firm Prabhudas Lilladher foresees healthy demand for Bajaj Auto from rural and urban markets, driven by new launches across categories and a strong presence in the 125+cc space. Swarnendu Bhushan, Co. Head of Research, Prabhudas Lilladher Pvt. Ltd, has upgraded the stock's rating from ‘sell’ to ‘hold’.

‘’Given the high growth rate in e-scooters/3W, market share expansion and consistent mix improvement, we change our rating from ‘Sell’ to ‘Hold’ and revise our target price upwards to 9,984 valuing the company at 27x (20x earlier), factoring in the high growth rate in the EV and premium segments,'' said Bhushan of Prabhudas.

On Tata Motors, domestic brokerage Elara Securities believes that the auto major's British luxury arm Jaguar Land Rover or JLR’s long-term target of 15 per cent EBIT margin is aggressive and depends on how its EV products are accepted, especially when EV profitability for global peers has been cause for concern. 

Despite JLR's market share in the global premium segment declining from 6.1 per cent in CY20 to 5.4 per cent in CY23, its revenue share increased from eight per cent to 10 per cent, driven by a richer product mix. 

‘’We reiterate ‘Accumulate’ with a target price of INR 1,100 based on a SOTP method. We value JLR at 2.5x FY26E adj EV/EBITDA, implying 8.0x target P/E, which is at a premium to BMW and Mercedes, but at a 30 per cent discount to Porsche. While Porsche has a higher EBIT margin of 17.7 per cent as on CY23, its ROCE is similar to JLR at 20-25 per cent,'' said Elara Securities.

Also Read: Bajaj Auto Q4 Results: Net profit at 2,011.4 crore, revenue up 30% YoY, dividend declared; 5 key highlights
 

3.Tata Motors vs Bajaj Auto: Outlook

Bajaj Auto looks to sustain momentum in its domestic business and expand production capacity for new businesses as it expects demand to remain robust in the current fiscal, according to Niraj Bajaj, Chairman, Bajaj Auto. "It is anticipated that India, now the fastest growing economy in the world, will achieve upwards of 7 per cent real GDP growth in FY2024, and various forecasts expect this buoyancy to continue in FY2025," said Bajaj.

Besides, the Pune-based firm looks to "navigate the challenging international landscape and stay the course on recovering our export volumes,'' said Bajaj. Bajaj Auto also plans to expand capacity, capabilities and network for its new businesses - Chetak electric scooters, electric three-wheelers and Triumph motorcycles.

Tata Motors remains cautiously optimistic about the near-term outlook for domestic demand over the full year and expects H1 to be relatively weaker. ‘’The premium luxury segment demand is likely to remain resilient despite emerging concerns on overall demand. Despite this, we are confident of delivering a strong performance in FY25,'' said Tata Motors in a statement on May 10.

 

4.Tata Motors vs Bajaj Auto: P&L print, revenue

Tata Motor's total revenue from operations in the fourth quarter of FY24 rose 14.3 per cent to 1.2 lakh crore, compared to 1.05 lakh crore in the year-ago period. Britain-based JLR, known for the Ranger Rover and top-selling Defender SUVs, is key to Tata Motors' quarterly results, comprising two-thirds of its consolidated revenue.

JLR reported "another record-breaking quarter'' in Q4 FY24. JLR's net profit in the March quarter was £1.4 billion pounds compared to £259 million in the year-ago period. JLR's revenues for FY24 were £29 billion, its highest-ever full-year revenue and up 27 per cent compared to FY23, while net profit for FY24 stood at £2.6 billion.

Bajaj Auto reported a rise of 18 per cent in consolidated net profit at 2,011.43 crore in the January-March quarter of FY24. Bajaj Auto is the first among its two-wheeler maker peers to report its March-quarter results. The company's earnings in the quarter-under-review was led by strong domestic demand for its motorcycles and a recovery in exports of the two-wheeler segment.

The auto major posted revenue of 11,249.8 crore for the January-March quarter up by 30 per cent from 8,660 crore during the same period last year.

 

5. Tata Motors vs Bajaj Auto: Corporate Action

Tata Motor's board recommended a final dividend of 6 per ordinary share and 6.20 per ‘A’ ordinary share for the financial year ended March 31, 2024. The dividend, if declared at the annual general meeting, shall be paid to the eligible shareholders on or before June 28, 2024.

‘’We would like to inform that the board of directors at its meeting held today has recommended declaration of final dividend of 6 per ordinary share of 2 each (at 300 per cent) ( 3 normal dividend and 3 special dividend) and 6.20 per ‘A’ Ordinary share of 2 each (at 310 per cent) ( 3.10 normal dividend and 3.10 special dividend) for FY24,'' said Tata Motors in its stock exchange filing.

Also Read: RBI MPC Minutes: Food inflation ‘persistently high’, price stability bedrock for high growth; 5 key highlights

Bajaj Auto's board also approved a dividend at the rate 80 per share (800 percent) of face value of 10 each on equity shares for the financial year ended March 31, 2024, totalling to 2,233 crore. The dividend, if approved by the shareholders at the Annual General Meeting to be held on July 16, 2024, will be credited on or around July 19, 2024.

‘’The dividend, if declared, shall be paid to the equity shareholders whose names appear on the Register of Members of the Company or in the records of the Depositories as beneficial owners of the shares as on Friday, 14 June 2024, which is the Record Date fixed for the purpose,'' said Bajaj Auto. The final dividend, along with the recent share buyback of 4,932 crore, adds up to an overall payout to shareholders of more than 95 per cent of the profit after tax.

 

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.

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News in Numbers

Numbers that help you understand news better
₹68,885 Cr

3.15L

48%

₹6.7 T

$240.5 M

$459 M

$3 B

₹588.25 Cr

₹20,000 Cr

7.93 Cr

₹8,943 Cr

10%

20 Yrs

First Published:21 Jun 2024, 08:51 PM IST
HomeMarketsStock MarketsTata Motors vs Bajaj Auto: Which auto stock should you bet on for long-term? Here’s a 5-point analysis

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