Stock Picks

Tata Motors: Zooming Ahead?

Tata Motors - Weekly Chart
Tata Motors has given a breakout from a double bottom formation and looks set to head higher to 560 levels and higher. At current levels of 449, it can be added and averaging, if possible, can be done if the stock corrects to 420 levels. This is our "Tekno-Funda" pick and thus we have a look at the fundamental factors too in this report.

Highlights:

  • For the Q4 of FY 15-16, the sales stood at Rs. 80,684.41 crores vs Rs. 72, 256.40 crores in Q3 of FY 15-16 and Rs. 67,777.72 Crores in Q4 of FY 14-15
  • The operating profit margin stood at 14.09% when compared to 12.63% in Q3 and 12.21% in Q4 of last FY
  • Excellent performance based on increase in sales of Jaguar, Land Rover as well as volume growth in medium and heavy commercial segment in domestic markets
  • There has been a decrease in both long term and short term debt in FY 15-16 vs FY 14-15 which means lower finance charges to the company
Valuation:
  • The company trades at a P/E of 10.98 and P/BV of 2.16
  • The company is giving a good ROE of 23%
We believe the company can head higher and see PE expansion. Tata Motors trades significantly lower on the PE scale compared to it's peers in the industry. This is a positional trade intended to be held for a few months only as of now.

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