homemarket Newsstocks NewsPositive on Ashok Leyland; expect 10 15% upside in Tata Motors’ stock: Reliance Securities
Positive on Ashok Leyland; expect 10-15% upside in Tata Motors’ stock: Reliance Securities
Tata Motors is certainly one of our top picks, however we still prefer Ashok Leyland over Tata Motors, said Mitul Shah, Head-Research, Reliance Securities, in an interview with CNBC-TV18.
October auto sales were largely better than expected, especially in the commercial vehicles space. However, tractor sales were under pressure for the likes of Escorts etc. Tata Motors also reported its second-quarter numbers and the losses were higher than expected but the management commentary remained positive.
In an interview to CNBC-TV18, Mitul Shah, Head-Research, Reliance Securities, discussed the auto sales numbers and shared his views on the same. He said, “Losses were more or less in line with the expectation but going forward, we are upbeat on the company and expect a 10-15 percent upside for the stock (Tata Motors).”
“The management commentary was really positive with few data points in terms of inventory levels at historically low levels. So, whenever chip shortage would get resolved, it would not be only the retail sales but inventory fill up and all those things would result in a very big spike in volume numbers for JLR for two, three quarters at a stretch,” said Shah.
“Therefore, going forward FY23 should be very strong for JLR and for India business, the new vehicle, the company already indicating that more than 8000 units were sold in a month for a single model itself, is a record-high number for any particular model in last 10 years in passenger vehicle business of India operations of the company. So, it is like all cylinders on fire. This recent electric vehicle deal and at the same time market share gain in MHCV, so a further 10-15 percent upside for the stock is possible and we retain our buy recommendation despite the price run-up,” said Shah.
Tata Motors is certainly one of our top picks, said Shah adding that they still prefer Ashok Leyland over Tata Motors.
“We remain more bullish on the MHCV story compared to the other segments, where recovery for the other segments already played out to some extent but in case of MHCV, recovery has to yet play out. So, with all those parameters put together and Ashok Leyland’s LCV business turning profitable in the last 12-18 months, and apart from this, Switch Mobility which is an electric vehicle subsidiary of Ashok Leyland and can get similar valuation like Tata Motors’ EV business in the future. So, potentials are there with Ashok Leyland and so we remain more bullish on that and it remains our top buy idea within the auto space,” he explained.
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On Tata Motors, Shah further said, “Around 70 to 80 percent of the earning upgrade is priced-in at current levels. But there are still a few parameters that people are not factoring in, that Maruti has already come out with a press release that their production level will be substantially higher in November, which a few other global players have also indicated. This reveals that the chip shortage issue which was expected to impact FY23 may not be the case and there could be faster recovery on the semiconductor side, which should result in better Q3 as well as very strong Q4 numbers for JLR as well as India business.
So we would expect a further 10-15 percent upside and definitely, our earnings would be revised in that range.”
For the full discussion, watch the video
(Edited by : Dipikka Ghosh)
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