What is in store for the next few quarters for Tata Motors? Devang Mehta answers

Devang Mehta, Director-Equity Advisory, Spark Private Wealth, says “the Tata Motors stock was fully priced in. Whatever management comments I was reading about, there is nothing negative as such on the Tata Motors front, not even on the JLR front, even the India business, the EV business is sort of doing well. But the negative sentiment is around, there is a global slowdown in demand for cars. If that is going to hurt the case which I was reading in the morning as well, in sort of news articles as well, that there is a global slowdown which is awaiting this industry.”


The Zomato management commentary is pretty strong, both on the turnaround for Blinkit as well as Hyperpure and the kind of addition they see to their business or for that matter, debt reduction as well. But the margins have fallen short of expectation. There is a big recovery in the stock price. But at 200 thereabouts, what is the call on the stock right now?
Devang Mehta: I do not track Zomato so closely in terms of numbers, but yes, the recovery has been dramatic over the last three-four quarters. The body language and the commentary of the management has also drastically changed and, in fact, numbers also; revenue has been rising. We have seen discretionary consumption doing extremely well across sectors, across people who are traveling, across people who are sort of eating out and also ordering food.

So, this phenomenon is probably now becoming more of a structural demand and then sort of a pent-up demand which people used to talk about two years back, post the completion of COVID. But yes, I think there are only a couple of players which are available over here – Zomato and Swiggy. Zomato tends to benefit as the first listed player over here and the numbers have been showing good traction. I have not gotten into the details of the numbers, but on the face of it, looks confident management and decent numbers.

What about UPL? That stock has run up 20-25% in a matter of three days and the earnings are more or less a beat versus expectation?
Devang Mehta: A lot of sectors, which earlier were sort of laggards, have also come back to the fore and there is more of sector rotation while the market consolidates or corrects a bit after this fast and furious rally. We have seen lots of sectors coming back and performing very well. This business has sort of suffered over the last couple of years, not delivering great numbers, but yes, this time also probably people are talking about normal monsoon and El Nino getting transferred to La Nina.

So, these types of noise probably is making these stocks do well and some of these businesses, for example, like PI Industries, UPL, had all underperformed and now they are again coming back and doing very well. I do not read much into it, but if the numbers are better for these companies who had underperformed over the last couple of years, there will be upside to such companies and also contrarily a lot of companies who have sort of behaved ahead of estimates of numbers are also falling because they are not sort of falling on the expectations which were sort of built into the business.

But that is not quite the case with Tata Motors, especially for the elevated levels, the stock was quoting it at, definitely them talking about a muted JLR guidance, that has really soured sentiment on the street. It is a deep 8.5% crack that you are seeing. What do you think is in store for the next few quarters for Tata Motors?
Devang Mehta: What we feel is that the stock was sort of fully priced in. Whatever management comments I was reading about, there is nothing negative as such on the Tata Motors front, not even on the JLR front, even the India business, the EV business is sort of doing well. But the negative sentiment is around, there is a global slowdown in demand for cars. If that is going to hurt the case which I was reading in the morning as well, in sort of news articles as well, that there is a global slowdown which is awaiting this industry.

Also somewhere down the line, maybe the CV cycle in India over the next six months, nine months, goes into a bit of hibernation. These are certain reasons wherein if you are fully priced in, if you have done extremely well over the last three-four years, there is probably a case where you correct a bit. It is not that you will sort of get into an eternal correction. You gain more strength and from here on, there will be new investors who will be wanting to enter. But yes, to be very fair, a lot of companies are now fully priced in and there will be some correction if you disappoint a little bit or if even the sector disappoints a bit.