Tata Motors is also one of the top-10 bluechip gainers of the year, having rallied nearly 12% over the period. Some other auto majors, including Maruti Suzuki India,
The strong performance of the Tata Motors stock has cushioned the sectoral index, comprising auto companies, as Tata Motors constitutes nearly 32.3% of the index. The BSE auto index has gained 0.4% year-to-date even as other interest rate-sensitive sectors like BSE Bankex and Realty indices lost 20-40% in the period.
While the outlook for the domestic auto market remains shaky, Tata Motors global sales have helped provide a buffer for the companys earnings and the stock. Although analysts acknowledge the negative effect of economic slowdown on the companys domestic sales, they remain upbeat on its Jaguar Land Rover (JLR) business. Almost 82% of analysts have a buy rating on the stock as per a compilation by Bloomberg. Tata Motors also features as one of the top picks of large brokerages, including Goldman Sachs and CLSA.
On Friday, Deutsche Bank upgraded the stock to buy, citing the positive global macro environment and the strong response to companys recent launches in JLR segment. The brokerage house also raised its target price for the stock to R400 from R275.
In late August, Barclays upgraded Tata Motors to overweight on expectations that JLR would maintain its lead on volume growth compared to peers like BMW and Audi due to its revamped product portfolio. While Tata Motors domestic business remains under stress due to macro concerns, we believe an improved performance from JLR should offset any drag from standalone operations, said the brokerage in a research note.
In fiscal 2012-13, nearly 76% of the consolidated revenue of Tata Motors came from operations outside of India. It witnessed 24% growth in revenue from China compared to 18% in the previous year on the back of strong sales JLR sales in the Chinese market. The division was responsible for nearly 88% of the companys operating profit in the fiscal.
While experts remain upbeat about the prospects of the JLR business, some have started questioning whether there is much upside left for the stock, given a sharp rally of about 27% in the last three months.
Recently, Kotak Institutional Equities downgraded the stock to add from buy, citing fair valuation of the stock. The brokerage, which also raised its target price on the stock from R355 to R375, however, acknowledged that JLRs operating profit is likely to benefit from a richer product mix and positive operating leverage.