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Tuesday, February 21, 2017

Tata Motors:Look beyond the Numbers

For Tata Motors the commentary goes thus...

For the quarter ended December 31, 2016, Tata Motors reported consolidated revenues (net of excise) of Rs.67,484 crores as against Rs.70,567 crores for the corresponding quarter last year (unfavourable translation impact of Rs. 10,670 crores). Consolidated Profit before tax for the quarter was Rs.599 crores, against Rs.3,414 crores for the corresponding quarter last year. This broadly reflects:-
In Jaguar Land Rover business -
  • Strong retail sales, up 8.5% y-o-y on continued strong demand for the product, revenue (in £) up 13.1% y-o-y ;
  • Lower wholesale volumes and relatively weaker product mix (including the run out of Discovery) in Jaguar Land Rover business, overall higher marketing expenses partially offset by credit relating to the recovery because of explosion at the port of Tianjin (China).





In Standalone business -
  • De -  growth in the M& HCV segment and flat LCV segment partially offset by growth in Car segment.



Consolidated Profit after tax (post profit / loss in respect of joint ventures and associate companies) for the quarter was Rs.112 crores, against the Consolidated Profit after tax (post profit / loss in respect of joint ventures and associate companies) of Rs.2,953 crores for the corresponding quarter last year.
For the nine months ended December 31, 2016, the Consolidated revenue (net of excise) was Rs.1,99,429 crores against  Rs.1,92,543 crores (unfavourable translation impact of Rs. 18,840 crores) for the corresponding period last year. The Consolidated Profit before tax for the nine months ended December 31, 2016 was Rs.4,149 crores against Rs.8,237 crores for the corresponding period last year. Consolidated Profit after tax (post profit / loss in respect of joint ventures and associate companies) for the nine months ended December 31, 2016 was Rs.3,220 crores, as against Rs.6,467 crores for the corresponding period last year.
The various numbers PAT,PE,PEG,EV,BV are important when looking at the stock price of a company but what really excites me is to look beyond mere mathematics .
Five years ago I personally felt the desire to own an SUV but was unable to buy an Audi or Merc and felt if these automobile companies developed a local variant there would be many guys like me willing to take the plunge.That happened and the so called 'urban compact SUVs' are all the rage and the best selling segment in India.
Next I feel is the localisation of the sports coupe - what one sees in the in the Ferraris,lamborghinis or maseratis.If only we could have a poor cousin of the sports coupe,let us say priced somewhere between one and half to two million rupees,it would be a big hit with the millenials and the value conscious.
Tata Motors with its base of really low end on one side to the Jaguar - Landrover capability on the other is best placed to take advantage in introducing an 'affordable' sports car.
The Marutis and Hyundais,even the Fords,Nissans are still far away from developing a platform for such and it could be a real differentiator for Tata Motors especially in the mass based India - China market half a decade hence.
Today the stock price of Tata Motors is Rs 460 and my recomendation is to buy on every fall in price and hold with a 10 year horizon.Even after discounting dividends and bonuses it will be a multi bagger and by then you will be able to trade Tesla in India !!