Professional Documents
Culture Documents
OUR BUSINESSES....................................................................................................... 1
COMMERCIAL VEHICLES.......................................................................................... 1
PASSENGER VEHICLES............................................................................................. 2
TATA MOTORS LIMITED............................................................................................... 2
Nature of the Industry............................................................................................. 2
Cost Components.................................................................................................... 3
Raw materials the biggest cost driver in the auto industry..................................3
FINAL CHECK LIST FOR BUYING STOCKS:...................................................................5
OUR BUSINESSES
Tata Motors has a unique position among global leaders in the automotive segment with an
unmatched range in both commercial and passenger vehicles in a well-known brand
portfolio.
COMMERCIAL VEHICLES
For decades, Tata Motors has led Indias commercial vehicle market
from the front. Through our deep understanding of the customers
needs, we have consistently brought innovation to this industry
with new product segments such as the sub-tonne mini truck Tata
Ace as the ideal last mile delivery vehicle and the Winger mini bus
for short distance passenger travel to revolutionise the trucking
landscape in the country with market-leading products, applications
and services.
PASSENGER VEHICLES
1. - Company has a good return on equity (ROE) track record: 3 Years ROE 22.89%
2. 10 years consistent track record of 27% sales growth, 33.85% PAT Growth and now
increasing sales margin.
Nature of the Industry
For a consumer, an automobile is usually the second most expensive purchase after a home.
A car is a durable good. So, a consumer can defer the purchase of a vehicle if the economy
isnt doing well. This makes the auto sector highly cyclical. The industry depends on a
number of broad-based economic indicators:
Unemployment levels
Consumer confidence
Disposable income
Credit availability
The automotive sector uses a wide range of materials in manufacturing. Metals such as
aluminium and steel, advanced plastics and other materials such as glass are used in most
modern automobiles. The pricing of materials is a significant expense for automakers and
fluctuations in price may change profit margins.
Cost Components
There are four major cost drivers in the production and sale of an automobile:
Raw materials
Labour
Advertising
Valuation Analysis
1. P/E Ratio
2. P/E to Growth
3. Earnings Yield > 10-year G-Sec yield 7.06%, greater than 10
year G-sec bond
4. Price to Sales < 1.5
5. Dividend More than 10% over 10 years 12.66%
Growth
6. P/B Ratio
Management Analysis
A) Subjective Parameters
1. Background Web search No negative info,
check of except for the case
promoters & for Cyrus.P Mistry
directors case
2. Management Good succession Salary being paid to
Succession plans plan should be in place potential successors
should be in line with
their experience
B) Objective Parameters
3. Salary of No salary increase with Nil
promoters vs.net Declining profits/losses
profits
4. Project execution Green/brownfield project No negative news
skills execution found here. Have track
record of expansion
5. Consistent Dividend CAGR >0 Dividends has been
Increase in increasing with
dividend increase in profits of
payments the company
6. Promoter > 51% 34.73%
shareholding
7. Promoter Insider buying ++ Nil
buying the
shares
8. FII shareholding ~ 0% 26.11%
Margin of Safety
1. MoS in Purchase EY > 10 Year G-Sec Yield EY more than 10 yr.
Price GSEC
2. Self- SSGR >
Sustainable Achieved Sales Growth Rate
Growth Rate
(SSGR)
Free Cash Flow FCF/CFO >> 0
Credit Rating
1. Credit Rating BBB- & above AA+
History