Tata Motors Limited (TML) is one of the leading automobile manufacturers in the world. They offer a wide and diverse portfolio of cars, sports utility vehicles, trucks, buses and defense vehicles to the world.
The company has operations in India, the UK, South Korea, South Africa, China, Brazil, Austria and Slovakia through a strong and diverse global network of subsidiaries, associate companies and Joint Ventures (JVs), including Jaguar Land Rover in the UK and Tata Daewoo in South Korea.
The chip supply has become smooth and the demand for the same is on the rise, things look certainly great for Tata Motors ahead of the curve, however spikes in interest rate can hamper the company’s progress.
Tata Motors has posted a healthy yet unconvincing set of numbers with their Q2 earnings results which was backed up by higher volumes at Jaguar and Land Rover (JLR) and a better product range. Its domestic passenger vehicle divisions output displays strong volume growth.
Growth in JLR
Supported by new products, the retail volumes have grown by 12 percent quarter on quarter (QoQ). Revenues have registered a growth of 19 percent QoQ, through higher realizations on the back of a new product range.
Despite the cost inflation due to commodities, JLR saw a 400-basis-point expansion in its EBITDA margin on a QoQ basis. This was led by the operating leverage and the better product range.
Domestic business is on track
TML’s domestic business posted a set of numbers which seem to be on the right track. Lowered demand in the commercial vehicle (CV) segment has impacted the volumes. Sequentially, the CV segment declined 1 percent in volumes. This led to the company posting a 9 percent downfall in its CV revenue due to lower realization.
The PV segment, has posted a QoQ growth of 10 percent in the volume, which has been supported by a powerful product portfolio. Moreover, the company posted an EBITDA margin contraction of 70 bps on a QoQ basis. The contraction was due to rising raw material prices.
The company has successfully captured market share from its competitors by bringing forth new products. Its market share has expanded by 100 bps in the PV market in Q2FY23 compared with Q1 FY23.
EV business leader
Currently, TML is the uncontested leader in the electric vehicle (EV) segment in India, and they have 3 products. TML has been able to acquire an 85 percent market share in the domestic EV segment.
The company has its highest-ever EV quarterly sales figure of 12,000 units in Q2FY23.
Tata Motors stock is taking support on the 23.6% retracement level and has been subdued in the range of Rs 530 to Rs 370. High risks are present for Tata Motors due to the steep hike in interest rates impacting consumer sentiment in key western markets. Investors should enter this stock after corrections for a long-term perspective.
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