Any adverse news in a group or stocks, that are known for integrity and transparency is always a buying opportunity. The replacement of Cyrus Mistry as the Chairman of the Tata Group and the search for a new Chairman is unlikely to be a major issue, in running individual companies. In fact, this has led to Tata Group stocks crashing near 10-15 per cent since Monday and some of these stocks are now buying opportunities. Take a look at few of the shares that could be bought from the Tata stable, if there is a further decline.
Tata Steel has fallen dramatically, following the recent decision to replace Cyrus Mistry, as the Chairman of the company. We like Tata Steel for a number of reasons. The first is that there is a lot of restructuring that is taking place in Tata Steel Europe. Germany's Thyssenkrupp AG and the Tata group-controlled Tata Steel, are planning to merge Europe operations. We are not sure, how far the talks have reached, but there are plans. Whether this will reach a logical conclusion, we are not certain. Tata Steel has been looking to exit its UK business and also had plans to sell it, after a slump in demand for steel
Should you buy Tata Steel after the recent fall?
We believe that Tata Steel might still be a tad bit expensive in terms of its share price. The stock has rallied a bit from levels of Rs 270 to Rs 398 on the back of sale of the Europe business. For the quarter ending June 20, 2016, the company reported a pretty decent set of results with net profits rising to Rs 572 crores. The EPS was around Rs 5.63. We believe the company can report an EPS of Rs 22 for the full year 2016-17. This will take the p/e to around 18 times, one year forward earnings. For a steel company this p/e maybe a tad bit expensive. However, considering the restructuring of its Europe operations, the stock maybe attractive.
Stock price movement?
Another reason for buying into Tata Steel is the huge domestic demand potential. As the government increases its emphasis on infrastructure development, there is likely to be a surge in demand for steel. In any case, talking of the stock price movement, the shares have seen a 52-week high price of Rs 431 and a 52-week low price of Rs 216. We believe that the stock for the next three years, may offer a buying opportunity
Tata Chemicals is one company that is unlikely to be too impacted by the changes at Tata Sons. The company is very professionally managed and is the second largest manufacturer of soda ash in the world. It also manufactures caustic soda, sodium bicarbonate and has a cement plant. Recently, the company ventured into the manufacture of water purifiers. It also manufactures the renowned "Tata Namak". The company has a solid track record of payment of dividend.
Fundamentals of Tata Chemicals
Tata Chemicals is a good profit making dividend company, with a consistent track record. For the quarter ending June 30, 2016, the company reported a net profit of Rs 202, taking the EPS to almost Rs 8. Even if it reports an EPS of Rs 32 for 2016-17, the stock at a p/e multiple of 20 times, should trade at a price of at least Rs 600. Not a bad bet at the current market price of Rs 532.
What about India Hotels, TCS, Tata Global Beverages?
Indian Hotels has been making losses in the past, though it has a terrific chain of hotels under the "Taj" brand. On the other hand as far as TCS is concerned, we believe that there maybe some more tough quarters left for the IT major. The industry as a whole is going through a rough patch, as IT spendings are cut. So, TCS really is not a stock that one could buy, as there could be more downside risks. Tata Global Beverages owns some fantastic brands like Tata Tea, Tetley and Himalayan. The problem with Tata Global Beverages is that the shares are highly valued with a very high p/e multiple.
What about Tata Motors and Tata Power?
Tata Motors, like all of the Tata Businesses, has some fantastic brands, especially Jaguar and Landrover. JLR is now doing exceptionally well, but, the problem here is that the share price of Tata Motors has rallied from levels of Rs 266 to the current levels of Rs 517. Why should you buy a stock that has doubled in the last few months? Tata Power could still be bought, but, it is not a stock that moves too much.
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