Tata Group Stock: Automobile giant, Tata Motors' share price emerged into a free fall on Tuesday, October 29, 2024, despite the market sentiment being bullish on the occasion of Dhanteras. The auto-heavy stock nosedived by nearly 6% to hit an intraday low of Rs 826.05 apiece.
Tata Motors share price:
After the trading session, Tata Motors stock ended at Rs 843.05 apiece, down by Rs 35.65 or 4.06% on BSE. The company's market cap was around Rs 3,10,326.01 crore.
At the latest price, Tata Motors shares have corrected significantly by 28.5% from its 52-week high of Rs 1,179.05 apiece. YTD, the stock is still in the green, however, its gains have been squeezed from double-digit to single-digit of 6.65% on BSE.
The price-to-equity ratio in Tata Motors is at 30.55x as of October 29, 2024, while its return on equity is at 33.69% which is still strong.
Why Tata Motors Share Price Fell On October 29?
The selling pressure in Tata Motors was amidst collective offloading in the auto index with other rivals like Bajaj Auto, Hero MotoCorp, Maruti Suzuki and Mahindra & Mahindra which also fell by 1% to 4.5%. Nifty Auto index itself ended with a decline of 1.6% to 23,588.60.
Among the key reasons why Tata Motors shares fell is because of concerns related to lacklustre demand in sales during the festive season. As per the Federation of Automobile Dealers Associations (FADA), personal vehicle sales witnessed a growth of 18.81% in September 2024, which was down year-on-year. Also, reports have stated that the inventor of vehicles is to the tune of 7.9 lakh, worth approximately Rs 79,000 crore.
Earlier, a report of SMIFS Limited dated October 11, 2024, which carried dealers' check for the festive season, it is known that demand is constrained across major PV OEMs such as Maruti Suzuki, Hyundai, and Tata Motors.
SMIFS expects the passenger vehicle industry to report flat numbers this festive season compared to last year, with the industry likely to enter a de-growth phase after October 2024, given the current situation.
It added, "Most sales are driven by substantial discounts. Inventory levels are around 60 days, except for the top-selling models."
On Tata Motors, SMIFS' report said, Tata PV retail sales are flat, but dealers are hopeful for a positive outcome by the end of the 32- days festive period. The Curvv model received positive feedback post-test drive, but overall retails are lower than expected. Petrol models are selling the most, followed by EVs & Diesel. The Nexon CNG is receiving a healthy response, though this has impacted the petrol model. Various promotions, including cash discounts, free accessories, exchange offers, and corporate discounts, are available across most models.
Should You Buy Tata Motors Share Price?
The latest to recommend BUY on Tata Motors is Sharekhan due to (1) JLR's production constraint in Q2FY2024 was known, (2) BMW's margin cut down was more of a company-specific issue, (3) JLR's guidance of 8.5% EBIT margin in FY2025 was accounted with moderation in global demand, and (4) Management's expectation of a strong recovery in both JLR's production and wholesale volumes in H2FY2025.
Recently, BMW - a leading global player in the luxury car segment - has cut down its EBIT margin guidance to 6-7% for CY2024 from 8-10%, as it is assuming a high warranty liability in Q3CY2024 due to issues with the integrated braking system and concerns about the Chinese market, the brokerage highlighted.
Given that BMW's margin guidance cut is largely led by company-specific issues, Sharekhan's note said, "We believe it is not appropriate to consider the same as a reference point for the whole industry and its peers as the key reason for the cut down in EBIT margin was company-specific. JLR anticipates a strong recovery in both production and wholesale volumes in H2FY2025. Further, management expects a gradual recovery in the CV segment from Q3FY2025 considering the healthy festive season and hope of an increase in infra spending. Given the rise in inventory levels, its domestic PV business limits wholesale to control inventories."
That being said, Sharekhan retained its BUY rating on Tata Motors with an unchanged PT of Rs. 1,319 based on expectations of continued improvement in JLR, PV, and CV businesses as well as reduced net automotive debt.
However, among the key risks as per Sharekhan would be TML's business is dependent upon cyclical industries such as CVs and PVs. Moreover, the company operates across the globe. Any slowdown or cyclical downturn in any of the locations where the company has a strong presence can affect business and profitability. The company's operations can be further affected if the ongoing global chip shortage worsens.
The auto player is set to split in the ratio of 1:2. The company is planning the demerger of Tata Motors into two separate listed companies housing A) the Commercial Vehicles business and its related investments in one entity and B) the Passenger Vehicles businesses including PV, EV, JLR, and its related investments in another entity.
Tata Motors Board of Directors are scheduled to meet on November 8, 2024 ,inter alia, to consider and approve the Audited Standalone Financial Results and Unaudited Consolidated Financial Results (with Limited Review) for the second quarter and half year ended September 30, 2024.
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