Why Tata Motors Share Price is Rising

In the realm of stock market dynamics, it's often observed that negative news tends to cast a shadow on share prices. However, Tata Motors has presented a fascinating anomaly.

Despite a sales report that painted a rather bleak picture, the company's stock has defied conventional wisdom by registering substantial gains.

In its latest sales update Tata Motors states that its total domestic sales in July 2024 declined by a disconcerting 11% year-on-year (YoY). In July 2024, its commercial vehicle sales plummeted 18% and passenger vehicle sales slipped 6%.

Yet, the company's share price has surged by 5.5% in the past five days and a remarkable 14% in the last month.

This begs the question: What's driving this rally?

Let's delve deeper.

#1 Strong Quarterly Sales Numbers

Tata Motors' July sales was disappointing but its Q1 sales data was quite impressive. The quarterly sales data has positively impacted its share price.

The company reported strong results across several key metrics compared to the same quarter last year.

Tata Motors Sales Data Q1 FY25

Particulars	Sales Figures in Q1 FY25	Change Compared to Q1 FY24
Tata Motors’ total global (wholesales)	329,847	2%
Tata Motors’ commercial vehicles and Tata Daewoo (wholesales)	93,410	6%
Tata Motor’s passenger vehicles (wholesales)	138,682	-1%
Jaguar Land Rover (wholesales)	97,755	5%
Jaguar Land Rover (retail sales)	111,180	9%

Data Source: Company Filings

Jaguar Land Rover (JLR) saw a 5% increase in wholesale volumes and a 9% rise in retail sales.

Range Rover, Range Rover Sport, and Defender models, which are the most profitable, made up 68% of total wholesale volumes. This strong performance reflects sustained demand for JLR vehicles.

Despite a slight decline in passenger vehicle wholesales, the overall quarterly performance remains strong. The company's efforts in producing vehicles compliant with 20% ethanol blends and a surge in EV production underscore its commitment to global environmental goals.

These positive quarterly results, alongside a strong product mix and increasing consumer demand, have boosted investor confidence. Consequently, Tata Motors' share price has seen an upward trend.

#2 Strong Quarterly Results

Tata Motors reported strong financial results for Q1 FY25. The company's revenue increased by 5.7% to Rs 1,080 billion (bn).

This growth was driven by robust performance across various segments, especially the CV and JLR divisions.

The CV segment led the growth with a 5.1% increase in revenue, reaching Rs 178 bn.

This was primarily due to a 5.7% rise in volumes, driven by higher demand in the medium and heavy commercial vehicles (M&HCV) segment.

The EBITDA margin for CV improved to 11.6%, while the EBIT margin rose to 8.9%. These improvements were due to better realisations and cost savings.

JLR also performed well, with revenues growing by 5.4%. The EBIT margin for JLR improved to 8.9%, benefiting from favorable volume mix and material cost improvements.

The PV segment faced challenges with a revenue decline of 7.7% to Rs 118 bn. However, the EBITDA margin improved to 5.8%, thanks to material cost reductions.

Tata Motors' overall PBT (before exceptional items) increased by Rs 33 bn to Rs 88 bn, driven by lower interest outflows and favorable currency and commodity movements.

The net profit stood at Rs 57 bn, reflecting a year-on-year (YoY) increase of Rs 24 bn.

The company also announced its demerger plans. The board has approved the scheme of demerger of Tata Motors into two separate listed companies and is expected to conclude in the next 12 to 15 months.

It also mentioned that the merger of Tata Motors Finance with Tata Capital is also underway and expected to conclude over the course of next 9 to 12 months.

#3 Sectoral Tailwinds

Expectations of strong sales in FY25 are boosting automobile stocks. A revival in the rural market has driven this surge. Forecasts of a normal monsoon and stable raw material prices promise healthy margins.

Strong demand fuelled by shifts in consumer spending post-pandemic, and the transition to electric vehicles (EVs) has surged automobile stocks. Easing supply chain constraints and accelerated EV adoption could further boost this trend.

A strong Indian economy translates into higher spending power, benefiting the auto, banking, and real estate sectors.

Vehicle sales have increased in every category over the past year, driven by a developing economy and greater disposable incomes.

In FY24, the domestic auto industry grew by 12.5%. The sector has made strides in producing vehicles compliant with 20% ethanol blends and has seen a dramatic surge in EV production.

Government initiatives promoting EVs are raising investment and stock prices for companies producing EVs or their components.

The outlook for the automobile industry is promising, with new model launches, positive consumer sentiment post-elections, and forecasts of healthy monsoons, steady fuel prices, and falling interest rates.

Normal monsoons, stable commodity prices, and expected rate cuts will further benefit the automobile industry. The Indian automotive sector is expected to grow with a forecasted CAGR above 8% through 2030.

As the Indian economy remains strong, consumer purchasing power will grow, making the sector's long-term outlook bright. These positive factors are boosting Tata Motors' share price.

How Tata Motors Share Price has Performed Recently

In the past five days, Tata Motors share price has rallied 5.3%. In the last month, it is up 14%.

In 2024, so far its share price has surged 44.5% and it has rallied 77.5% in the last one year.

The stock touched its 52-week high of Rs 1,179.1 on 30 July 2024 and a 52-week low of Rs 593.5 on 25 August 2023.

About Tata Motors

Tata Motors Limited is a leading global automobile manufacturer with a portfolio that covers a wide range of cars, SUVs, buses, trucks, pickups, and defence vehicles.

It's a US$ 34 bn organisation and a leading global automobile manufacturing company.

Tata Motors offers an extensive range of integrated, smart, and e-mobility solutions.

The company has a strong presence in India, but it also exports its vehicles to over 100 countries around the world. It has several joint ventures with other automotive manufacturers, including Fiat, Jaguar Land Rover, and Daimler.

To know more about the company, check out Tata Motors financial factsheet and its latest quarterly results.

You can also compare Tata Motors with its peers:

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To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy Investing.

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