Here’s a turnaround Indian stock supported by urban demand.
Tata Motors (TTM)
from Global Investing
Deutsche Bank and Société Générale analysts have upgraded my stock idea, Tata Motors (TTM).
Jaguar-Landover provides most of TTM revenues but my focus is on the Tata side, which was straggling when we sold. My skepticism has ended.
Now Tata Motors is in a turnaround and with good numbers. TTM sold 7% more cars this April than last mainly because Indian domestic sales grew 5%, with passenger vehicle sales up 37% here, and 18% for exports.
The domestic market recovery comes from a rise in urban demand because of the economic and industrial recovery under Modi which also drives commercial vehicle sales. Fuel costs are down so more first-time car buyers are back.
Mumbai broker Motilal Oswal expects TTM to grow volume at a healthy 28% this fiscal year. Medium and Heavy Commercial Vehicle sales can grow 30%.
Why add another Indian stock? TTM’s ADR is still cheap. So far, TTM is the second largest foreign favorite. Credit is cheap and getting cheaper. TTM launches a new budget “Nano”this month.
Moreover, FII (foreign institutional investor) India stock positions hit a 6-yr high in the March quarter, ~$303.5 billion, up 55% from last year. Indians are buying stocks even faster. FII share ownership declined from 6.54% to 6.44% y/y.
JLR is growing strongly after its best sales year ever in FY 2014-5.It started the new fiscal with its best April as US sales grew 15%, driven by strong 17% Land Rover buying. JLR US sales are already up 19% YTD from last year.
A new JLR plant just came on in China, soon to be joined by new plants in Brazil and Mexico, marking Tata’s multinational ambitions. TTM is still cheap, at a P/E of 9x.
Vivian Lewis, Global Investing, www.global-investing.com, 212-758-9480, May 8, 2015