Tata Motors extends gain on healthy volumes in March

With government's thrust on infrastructure, private capex cycle revival and need for personal mobility, analysts expect PV and CV space, in particular, to witness healthy pick-up in sales volume

Shares of Tata Motors gained 3 per cent to Rs 460 on the BSE in Tuesday's intra-day trade, in an otherwise subdued market, gaining 6 per cent in three trading days after the company reported a healthy volumes in the month of March.

The counter witnessed large trading volume with a combined around 12 million shares having changed hands on the NSE and BSE till 10:33 am. In comparison, the S&P BSE Sensex was down 0.39 per cent at 60,377 points.

Tata Motors' total domestic sales volume grew 30 per cent year-on-year (YoY) at 86,718 units in March 2022 as against 66,462 units in March 2021.

Total domestic commercial vehicles (CV) sales rose 21 per cent to 44,425 units in March 2022 over March 2021. Total domestic passenger vehicle (PV) sales jumped 43 per cent to 42,293 units in March 2022 over March 2021. PV ICE (internal combustion engine) sales rose 34 per cent to 38,936 units while PV EV (electric vehicle) sales surged 376 per cent to 3,357 units in March 2022 over March 2021.

The management said CV growth was on the back of increased activity in road construction, mining and improved infrastructure spending by the Central and State Government. Early signs of recovery were seen in the CV passenger segment. However, the management said it is cautiously optimistic about domestic MHCV and ILCV demand while keeping a close watch on geopolitical developments, fuel inflation and semiconductor shortage.

Easing semiconductor supplies, meanwhile, boosted PV retails. CVs continue to grow on increasing economic activity and high capacity utilization. Brokerage firm Motilal Oswal Financial Services expects the momentum in the CV cycle to continue. "We prefer companies with higher visibility in terms of a demand recovery, a strong competitive positioning, margin drivers, and balance sheet strength," the brokerage firm said.

"With government's thrust on infrastructure, private capex cycle revival and need for personal mobility, we expect PV and CV space, in particular, to witness healthy pick-up in sales volume, going forward. Near term bumps however in terms of fuel inflation, semiconductor supply will be key monitorables," ICICI Securities said in a auto sector report.

The brokerage firm has a 'buy' rating on Tata Motors with a target price of Rs 515 per share. The stock has taken support near Rs 380-400 levels on multiple instances in the past. Also, looking at the significant delivery volume activity in October 2021 and then in early March 2022, these levels seem very crucial. In such a scenario, the positive bias may continue in the stock till these levels are held, analysts said in their report.

The Delivery Z score reading in the cash segment indicates there is still room for further delivery pick-up in coming days. In due course, the up move should pan out in the stock, they said.

That said, Tata Motors has underperformed the market by falling 7 per cent in the past three months, as compared to 0.19 per cent rise in the S&P BSE Sensex. Over the past one month, it was up 9 per cent, as against 11 per cent rally in the benchmark index. The stock had hit a 52-week high of Rs 537 on November 17, 2021.