Updated: Jun 13
The Tata group company has in recent years scripted a stellar turnaround to become India's third-largest carmaker. We've talked about this Tata Group stock earlier in our EV Blog, but the present valuations and the possible consolidation is now highlighting the phoenix in Indian automobile market as a potential SIP candidate. Yes, you got that right, it is Tata Motors DVR.
Make sure to read the earlier EV Wizard blog to catch important highlights about Tata Motors if you haven't done so yet ( https://www.dvsafeacestrategies.com/post/one-must-have-ev-wizard-to-pocket-marvelous-gains-in-india-s-ev-rush-d-v-safe-ace-strategies ).
Why do we place Tata Motors higher over any other auto stock listed on NSE?
Source: D&V Safe Ace Strategies
The above visuals indicate the percentage difference between the annual sales and the market cap of a few major auto firms. It is very clearly evident that there's only one name which has a positive difference (sales > market cap) between its sales and the market cap - Tata Motors. It is obviously because Tata Motors is a loss making company according to the statistics. However, today, it is India’s third-largest carmaker, cornering 10 percent of the market share, up from a paltry 4.8 percent in 2020. With the pace that Tata Motors is heading higher, especially in the EV segment, present valuations that the stock trades at would not be enough in months to come.
Also, Tata Motors aims to become a zero net debt company by FY24. "Last year, due to the internal cash flows and tight management, we were able to reduce the debt by over 7,500 crores. And we are very much on our path and stay committed to meet our target of FY24," Chandrasekaran said at Tata Motors’ 76th AGM.
Tata Motors recently revealed that it is set to foray into E-Cargo mobility. Company aims to build more than 80,000 electric vehicles in the current financial year. Moreover, Tata Motors' Chairman says they have finalised plans for battery manufacturing and will reveal plans soon.
Once Tata Motors manages to turn into a profitable company and with debt being laid off entirely, there will be a flood of bullish research calls from multiple brokerage firms simultaneously as the difference (sales vs market cap) we highlighted will no longer be justified.
Thus, we believe that Tata Motors is a very attractive bluechip SIP candidate especially for medium - long term investors. Another important thing that we would like to highlight here is that we find Tata Motors DVR a much better investment option as compared to Tata Motors.
Why do we find Tata Motors DVR attractive against Tata Motors?
DVR shares are like ordinary shares, but with fewer voting rights. They are ideal for small shareholders as they rarely exercise their voting rights. DVR shares are priced lower at issuance and offer higher dividends; in return, the voting rights are limited. For instance, the holders of Tata Motors' DVR shares can cast one vote for every 10 shares held. However, they get 5-10% more dividend than ordinary shareholders.
Tata Motors DVR is available at ₹208 whereas Tata Motors trades at ₹408 (greater than 100% as compared to Tata Motors DVR). Moreover, DVR shares usually produce more returns on every positive trigger for the company.
Why is SIP mode of investment attractive as compared to lumpsum investment?
--> Lighter on wallet
--> Enables rupee cost averaging
--> Makes market timing irrelevant
Technical Overview For Tata Motors DVR:
Tata Motors DVR: 1M (Monthly) Technical Chart
The monthly chart of Tata Motors DVR indicates that an inverse bullish Head and Shoulders pattern formation may be in the making. The stock is presently neutral-weak on technical charts which makes it more decent for SIPs. The stock may dip upto ₹135 - ₹159 (worst case scenario) due to ongoing geopolitical tensions. The neckline approximately will be placed at around 255 - 275 if the pattern that we are anticipating is completely formed. Aggressive targets in case of successful inverse Head and Shoulders formation stands at ₹507.
Time duration for the stock to reach the defined target will be approximately 2.5 - 3 years.
Accumulation range: ₹159 - ₹210
Accumulation mode: SIP
SIP Frequency: Daily or Weekly (for aggressive investors) or fortnightly (for conservative investors)
Medium term target (6 months - 9 months): ₹273
Long term target: ₹507 (2 years - 3 years)
Potential Upside: Over 150%.
Note: The greater the stock corrects, the bigger the size of opportunity turns with SIP as mode of investment! Learn to freak out less and begin loving a market correction!
Disclaimer: We are not SEBI Registered. The above mentioned analysis is not a recommendation and is mentioned here for educational purposes only. Do consult your financial advisor before making any decision regarding your investments.