Four Tata Group stocks more than doubled in the last six months, should you buy them now?
Tata Motors, Tata Elxsi, Tata Steel Long Products & Tata Chemicals more than double since 24th August 2020.
The last six to seven months have been quite eventful for India as economic activities resumed. In fact, benchmark Indian indices Sensex & Nifty rose 28% in the last six months. But one of India oldest and largest conglomerate Tata Group saw stock prices of its 4 group companies namely Tata Motors, Tata Elxsi, Tata Steel Long Products & Tata Chemicals more than double since 24th August 2020.
Ace investor Rakesh Jhunjnwala in an interview with ET Now said, “investors still underappreciate the ability of Tata Group. Extremely bullish on Tata Group since N Chandra took over. Emphasis on consumer focus & cash flows will last forever. In my opinion, the biggest growth will come in Tata Motors.”
Tata Motors stock price more than doubled from Rs 121 on August 24, 2020 to Rs 324 on February 23, 2021. This translates into returns of 167%. In simple words, Rs 1 lakh invested in the stock on August 24, 2020 is today worth Rs 2,67,409. The major chunk of the gain can be attributed to improving domestic business with increasing market share for passenger and commercial vehicles and focus on battery-powered cars, among others.
Besides, the company reiterated its improved profitability and positive free cash flow targets for commercial and passenger vehicle businesses and its ambitions to turn net debt-free by FY24, the company said in an investor call.
Motilal Oswal Financial Services maintained a ‘BUY’ rating on the stock with a target price of Rs 390 per share.
‘Tata Motors expects the overall domestic CV industry to grow by 36-38% in FY22, with M&HCV growing at 60-65%. Replacement demand is yet to return due to apprehension on the viability of BS-VI technology, and an increase in the CV population. Demand is driven by freight growth. The latter should be good as economies recover. Also, recovery in infra and real estate will be supportive,’ the brokerage added.
Leader of design and technology services of the group Tata Elxsi is no small fish. The stock has risen 153% from Rs 1,071 August 2020 to Rs 2,715 as on 23rd February 2020. It means Rs 1,00,000 invested six months back today has turned into Rs 2,53,392.
In the December quarter, Tata Elxsi reported nearly 40% profit growth with revenues rising nearly 13% year on year.
The management sounded upbeat, “entering the fourth quarter and the New Year with the reinforced confidence of a strong deal pipeline across markets and industries.”
“While we take note that the stock has already reported a massive rally in the past 6 months, we believe that Tata Elxsi is a “portfolio must-have” and should therefore be added on all major dips as the company has consistently proven its mettle through time,” said Mayank Babla of Dalal & Broacha
Another group company that has given 114% returns to shareholders is Tata Steel Long Products. Rs 1 lakh invested in August 2020 is today worth Rs 2,14,077. With the company being one of the largest speciality steel plants catering to the auto & wire rope industry was back in the black on the back of strong operational performance.
In November 2020, the Tata Steel Group announced the amalgamation of Tata Metaliks (TML) and Tata Steel Long Products. The amalgamation is in line with the strategy of the Tata Steel Group vision to integrate the business under 4 main clusters viz Long products, Downstream, Mining and Infrastructure yielding synergy advantages. The amalgamation is expected to be concluded by H1CY2021.
Nalin Shah of NVS Wealth Managers believes that the turnaround in financial performance coupled with strong buoyancy in the DRI and Steel prices along with a strong demand emanating from both domestic and global markets the company is in a sweet spot to capture the strong momentum in the steel market.
Tata Chemicals with a portfolio of basic chemicals has made an investment of Rs 1,00,000 to Rs 2,01, 524 in the last six months.
A lot is expected from this Tata Group company as it has lined up everything to kickstart the EV ecosystem. For example, it is building an energy storage system facility for mobility and stationary charging, with labs in Pune and Chennai.
(Disclaimer: The recommendations in this story are by the respective research and brokerage firms. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)