Eugene Kogan: About Tata Motors

we Investigate the action of the automobile industry.

Continue to explore the company's industry. Today we have to queue India's Tata Motors (TTM US).

Company TATA was founded in 1945 In India was known as a manufacturer of locomotives. However, in 1954, began producing the first vehicles together with Daimler-Benz. A key focus of the company – production of cars, luxury sports cars, trucks, vans and buses, and construction equipment and products of the machine tool.

The company owns such iconic brands as Jaguar and Land Rover, which was bought from Ford Motors in 2008, and also the brand Daewoo. Today Tata capitalization is about $3.8 billion

I already wrote about that sector of the industry now is not the best of times, and therefore, except for some of ideas, great potential in the shares of industry do not see. However, we recall the main indicators for the sector, previously announced.

In March, the volume of car sales in the UK fell by 37.6% compared with the previous year to 78 767 thousand. Car sales in the EU over the same period fell to 55.1 per cent. Pressure experienced, Volkswagen, Renault, BMW, and Daimler. In those States the situation is not much better: sales of new cars fell by 37.9%.

Tata Motors in their units for the 4th quarter of the 2020 fiscal year showed a decrease of car sales in annual terms, including indicators of Jaguar Land Rover, 35%. Sales of passenger cars fell by 26%. It should also be noted that directly in India car sales fall for the past 16 months.

Now look at the financial results.

At the end of the quarter, the company expects revenue of $8,142 billion, loss per share of $0.09 compared to net loss of $191,8 million

It should be noted that revenue for the 3rd quarter of the 2020 fiscal year ending December 31, 2019 totaled $10,39 billion of 11.26 billion a year earlier. Net profit of Tata received at $244,2 mln vs consensus of $99,9 million against loss of $ 1.02 billion a year earlier.

The results are certainly not impressive. On the other hand, they are not beaten out from the General situation in the sector. In General, when viewed in the context of the past 5 years, TTM share fell to 86%.

The company today looks very cheap in market multiples. In particular, P/S extremely low: at the level of 0.09. The ratio EV/EBITDA is also very comfortable to buy – a 3.5.

As for the debt load that Tata has one of the best ratios in the industry NetDebt/EBITDA: at the level of 3.7. Below is just a Ferrari (about 1.4).

In my opinion, Tata Motors – quite an interesting speculative story. Low multipliers and relatively comfortable debt load – main triggers. The American India ETF (INDA US) for last month rose in price by almost 25%.

Risks, of course, quite high. For example, in the current quarter auto sales will likely show record. But, on the other hand, it's probably, for the most part already incorporated in current prices.

Yesterday bought paper TTM in one of the portfolios service BidKogan ( Today, the position is already in profit. In this pre-market paper continues to grow.

We'll see what happens next, but don't forget about the risks.


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