Tata Motors Stock Surges 782% in 5 Years: Is the Rally Still On?

Tata Motors Ltd, a major player in the automobile sector, has seen its stock skyrocket by 782% over the past five years, significantly boosting shareholder wealth. Even in 2024, Tata Motors continued its impressive performance with a 36% rise in its share price, outpacing the Nifty 50 index, which gained 11.9% during the same period.

Massive Returns

To put it in perspective, if you had invested ₹50,000 in Tata Motors stock in August 2019, your investment would now be worth approximately ₹440,000. Currently, Tata Motors has a market valuation of ₹3,82,500 crore, making it one of India’s largest automobile companies. However, investors are now questioning whether the stock can continue its remarkable run.

Shifting Gears

Tata Motors has transformed itself over the years. Known for manufacturing passenger cars, commercial vehicles, pickups, buses, vans, and trucks, the company has recently expanded its product line to include electric vehicles (EVs). As one of India’s largest EV manufacturers, Tata Motors has seen its sales grow from ₹2,64,041 crore in 2020 to ₹4,43,878 crore in 2024, marking an annual growth rate of nearly 11%.

While the company posted a net loss of ₹10,975 crore in 2020, it reported a net income of ₹31,807 crore in 2024. In the latest quarter, Tata Motors’ net income surged by 72% year-on-year to ₹5,692 crore, with revenue rising by 6% to ₹1,09,623 crore.

Financial Performance

The company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) grew by 19% to ₹15,785 crore in the first quarter, with its EBITDA margin expanding by 170 basis points to 14.6%. Sales from the Jaguar Land Rover division increased by 5.4% to £7.3 billion, with its EBIT margin improving by 30 basis points to 8.9%.

Strategic Moves

Tata Motors has announced a plan to split into two separate listed entities, dividing its passenger vehicle and commercial vehicle businesses. This demerger is expected to help each segment capitalize on growth opportunities, with a more focused and agile approach. The move could also result in better synergies between the passenger and electric vehicle segments, potentially commanding a higher valuation.

The Big EV Bet

The electric vehicle market in India is booming, with forecasts predicting growth from $8 billion in 2023 to $23.38 billion in 2024 and $118 billion by 2032. Although Tata Motors holds a 63% market share in the domestic EV market, this has declined from 70% last year. Despite the challenges, Tata Motors remains optimistic about selling 100,000 EVs by the end of FY 2025.

Introducing Tata Curvv

Tata Motors recently launched its first mid-sized electric SUV, the Curvv EV, priced at ₹17.49 lakh. This is Tata Motors’ fifth electric car and could be a significant revenue driver. Brokerages Nomura and Jeffries have both issued “Buy” ratings for Tata Motors, with price targets of ₹1,303 and ₹1,330, respectively.

Market Valuation

Tata Motors’ stock is trading at a price-to-earnings ratio of 10.25x, which is lower than Maruti Suzuki’s 26x, indicating a potentially attractive valuation. However, the company’s capital-intensive nature means it will continue to invest heavily in expanding its EV capabilities, which could impact cash flow in the short term.

Global Outlook

A significant portion of Tata Motors’ business comes from global markets, particularly through its Jaguar Land Rover division. While this offers long-term growth potential, the company could face challenges in the near term due to a possible global economic slowdown.

Tata Motors is well-positioned to maintain its momentum if it navigates these challenges effectively. The company’s strong earnings growth and focus on innovation suggest a promising future. However, as always, potential investors should conduct thorough research or consult a financial advisor before making investment decisions.