Tata Motors near seven-month high; stock surges 16% in six days

Shares of Tata Motors continued their their northward journey, trading close to seven-month high of Rs 185, up 2 per cent on Wednesday, on the back of a slew of positive news.

The commercial vehicles major's stock has rallied 16 per cent in the past six trading days, as compared to 3 per cent rise in the benchmark S&P BSE Sensex. It was trading at its highest level since May 28, 2019. The stock has now surged 73 per cent from its 52-week low of Rs 106, touched on September 4, 2019 on the BSE.

Tata Motors’ British arm Jaguar Land Rover (JLR) reported a consistent improvement in China sales for the fifth consecutive month in November.

The rally was also attributed to victory of British Prime Minister Boris Johnson in the UK election, which renewed hopes that the Brexit could happen by January 2020. A possible deal will end the uncertainty as Tata Motors derive a big chunk of their business from the UK.

"Against the backdrop of a downturn in the global automotive market, we were pleased to see our sales grow in the US and China. Despite the ongoing headwinds in China, we continue to see green shoots of recovery in our sales there,” said Felix Brautigam, Jaguar Land Rover Chief Commercial Officer.

Earlier this month, Tata Motors had raised around Rs 3,000 crore by allotting 202 million equity shares to promoter Tata Sons through preferential issue. The company also allotted 231 million convertible warrants to Tata Sons. Post allotment, Tata Sons stake in automobile company increased to 43.08 per cent from 34.69 per cent, Tata Motors said in an exchange filing.

“JLR has been executing a credible turnaround plan “Project Charge” which entails rationalization of investment spending, WC improvement and aggressive cost reductions. However, negative FCF concerns at JLR still persist (entails further capex rationalization) and sustainability of margin improvement needs to be monitored amid macro/ industry headwinds (Brexit/ CO2 emission norms),” analysts at JP Morgan said in November report.

For a constructive view on the stock, the brokerage firm believes it is critical to get visibility on FCF improvement, sustainable margin delivery, and a China turnaround.

At 10:40 am, Tata Motors was trading 1 per cent higher at Rs 183 on the BSE, against 0.14 per cent rise in the S&P BSE Sensex. A combined 22 million equity shares changed hands on the counter in first one-and-half hour of trading on the NSE and BSE.