Tata Motors rallies for 11th day straight, hits 28-month high; here's why

ICICI Securities expects Tata Motors to report stable performance in Q3FY21
Shares of Tata Motors extended their winning run to the 11th straight day on Friday after the stock rose 7 per cent to hit a 28-month high of Rs 261.50 on the BSE in an otherwise weak market. The stock was trading at its highest level since September 2018.

The stock, however, pared gains later, and was ruling 5 per cent higher on the BSE after it clarified that the company had no plans to form partnership with US-based Tesla for electric mobility.

"Tata Motors has not taken any decision regarding a strategic partner for its PV business and categorically denies any and all rumours suggesting the same," it said in a press release.

Media reports had earlier suggested that Tesla may choose Tata Motors for its much awaited foray into the Indian market. The rumour was further fuelled when the official twitter handle of Tata Motors' electric vehicles-wing (TatamotorEV) tweeted an encrypted message welcoming Tesla to India and talking about their rumoured partnership. The tweet, however, was later taken down. 

In the past one week, it has rallied 32 per cent after the company's subsidiary Jaguar Land Rover (JLR) posted a second successive quarter-on-quarter (QoQ) recovery in sales, despite the continuing impact of Covid-19. In comparison, the S&P BSE Sensex gained 1 per cent during the week.

With today’s gain, Tata Motors share price has risen 42 per cent thus far in the month of January 2021, against a 3 per cent rise in the benchmark index.

JLR on Monday released its quarter ended December 2020 (Q3FY21) sales figures, which reflect a considerable hit as a result of the Covid-19 pandemic, but the company highlighted signs of recovery as sales in China remained strong. China sales were particularly encouraging, up 20.2 per cent on the prior quarter and 19.1 per cent year-on-year (YoY), JLR said in a media statement.

The management said JLR's performance in China, the region least impacted by Covid-19 in the most recent quarter, has been particularly encouraging with our sales there growing on both a year-on-year and quarter-on-quarter basis. Other markets are also showing strong signs of recovery, despite second Covid waves across the globe, it said.

On January 1, Tata Motors said the company reported a 21 per cent increase in total vehicle sales in the domestic market to 53,430 units in December. M&HCVs and ILCVs led the recovery, growing by 10 per cent and 7 per cent, respectively over Q3FY20 with higher demand in infrastructure, including road construction, mining and e-commerce segments. The offtake continued to be higher than retail to support sequential month on month growth in retail while ensuring healthy inventory levels in the pipeline, the company said in a press release.

Meanwhile, ICICI Securities expects Tata Motors to report stable performance in Q3FY21. JLR volume recovery along with improvement in product mix and market mix continues to be on track. This coupled with cost-cutting and controlled capex will drive sharp improvement in profitability and free cash flow (FCF), said analysts at Motilal Oswal Securities.

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