A Giant for the price of a Dwarf
I am an avid traveler & have now set foot on 26 countries, last one being Vietnam. Now Vietnam is a small & developing country with their GDP being lower than the state of Maharashtra. Moreover it is a communist country where show of wealth is not exactly encouraged. Nevertheless, I was surprised to see the widespread popularity of the Range Rover Sports ( price of INR 2 crores) .
Land Rover is now exported to 170 out of 196 countries in the world & is arguably the world's best premium SUV brand. Globally not many recognize TCS, Reliance, Sun, Maruti or Infy but they surely aspire to own a Land Rover. It is easily India's biggest global brand. Jaguar is a distant second, with exports to 70 countries. As is well known they are both housed in Tata Motors.
Tata Motors is a giant, luckily our market has not taken notice. Let me put forth an interesting comparison to emphasize this point.
(Mkt cap includes DVR & ADR)
Tata Motors is bigger than the entire consumer facing listed Indian Automobile Industry.
It is larger than more than 20 companies which includes leaders like Maruti, Hero, Bajaj Auto, Eicher, Mahindra, Leyland etc. In fact it is growing at ~20% adding greenfield capacities every two years(2014 - China, 2016 - Slovekia, 2018 - Brazil) on top of brownfield expansion of doubling engine capacity at UK in 2015 & further doubling capacity by 2019. The Indian automobile industry is growing at 11-12 %. Ironically Maruti & the Gujarat plant are still work in progress while JLR has commissioned three plants in that period. Yet the EV of Tata Motors is at a 60% discount to that of Indian automobile industry. Ironic, given that Tata Motors is larger, more diversified, growing faster & has stronger brands.
It is rare to find a franchise where the problem is "They can't supply enough". Even in a competitive market like US, the discounting is less than 1% and the sales are growing at 25%. They are less than 10% of the leader in almost all markets except UK thus headroom to grow at this pace for another 5 years atleast.
Often incase of Tata Motors people start discussing Nano & CV's etc, well the domestic operations are now irrelevant. Maybe it should be renamed JLR Motors Ltd. The only noteworthy metric is the global sales numbers announced on the 11th of every month alongwith a countrywide break up.
They say Giants grow fast, so don't blink & miss.
Tata Motors is well set to be the first one to cross a 100 Billion dollars in sales & market cap.
Land Rover is now exported to 170 out of 196 countries in the world & is arguably the world's best premium SUV brand. Globally not many recognize TCS, Reliance, Sun, Maruti or Infy but they surely aspire to own a Land Rover. It is easily India's biggest global brand. Jaguar is a distant second, with exports to 70 countries. As is well known they are both housed in Tata Motors.
Tata Motors is a giant, luckily our market has not taken notice. Let me put forth an interesting comparison to emphasize this point.
| Rs. Crores | Sales | Net profit | Market Cap | Net Debt | Enterprise |
| Value | |||||
| Auto - 2 & 3 wheelers | 60,316 | 5,609 | 148,403 | (12,000) | 136,403 |
| Auto - Cars & Jeeps | 130,707 | 7,651 | 198,754 | 10,000 | 208,754 |
| Auto - Tractors | 4,692 | 50 | 9,249 | 100 | 9,349 |
| Auto - LCV & HCV | 22,371 | 1,422 | 90,055 | 3,800 | 93,855 |
| Indian Auto ( Ex Tata motors) | 218,085 | 14,731 | 446,461 | 1,900 | 448,361 |
| vs | |||||
| Tata Motors | 263,695 | 14,100 | 145,000 | 27,000 | 172,000 |
Tata Motors is bigger than the entire consumer facing listed Indian Automobile Industry.
It is larger than more than 20 companies which includes leaders like Maruti, Hero, Bajaj Auto, Eicher, Mahindra, Leyland etc. In fact it is growing at ~20% adding greenfield capacities every two years(2014 - China, 2016 - Slovekia, 2018 - Brazil) on top of brownfield expansion of doubling engine capacity at UK in 2015 & further doubling capacity by 2019. The Indian automobile industry is growing at 11-12 %. Ironically Maruti & the Gujarat plant are still work in progress while JLR has commissioned three plants in that period. Yet the EV of Tata Motors is at a 60% discount to that of Indian automobile industry. Ironic, given that Tata Motors is larger, more diversified, growing faster & has stronger brands.
It is rare to find a franchise where the problem is "They can't supply enough". Even in a competitive market like US, the discounting is less than 1% and the sales are growing at 25%. They are less than 10% of the leader in almost all markets except UK thus headroom to grow at this pace for another 5 years atleast.
Often incase of Tata Motors people start discussing Nano & CV's etc, well the domestic operations are now irrelevant. Maybe it should be renamed JLR Motors Ltd. The only noteworthy metric is the global sales numbers announced on the 11th of every month alongwith a countrywide break up.
They say Giants grow fast, so don't blink & miss.
Tata Motors is well set to be the first one to cross a 100 Billion dollars in sales & market cap.
Interesting, never noticed this trivia about Tata Motors. It always seemed cheap vs Maruti but suddenly looks grossly undervalued.
ReplyDeletevery interesting intake. looks good at cmp. Pblm is future electric car i.e Tesla can bring disruption to the industry. All major luxury car makers are trading dirt cheap
ReplyDeleteTesla for sure is a big threat & not just about an alternate fuel but the whole experience is commendable. The market has priced it, Tesla with quarterly sales of $1 bn is at a market cap of $ 32 bn while Daimler with quarterly sales of $ 35bn is at a mkt cap of $ 60 bn.
DeletePost Apple, disruption is quite commonly used & expected in the automobile space. But unlike mobile handsets/ computers this space has distribution, geographic & regulatory challenges. Moreover competitors catch up reasonably fast, most of these companies have now been around since the invention of the car.
Here are the challenges Tesla faces, which are the top news results on Google .. https://www.google.co.in/?gfe_rd=cr&ei=Y1x7V6SXJcaL8Qe94ITQAg#q=tesla&tbm=nws . These issues are very basic, beginning from safety to production & in due course there will be more hardware problems which will require fix as well.
In my opinion while Tesla will surely be a success story, this is not an industry where the winner takes all & the other players will maintain their hold too. The market has priced one for for glory at 8x sales & the other for doom at 0.4x sales. I am betting on convergence at maybe 1x or 2x sales.
Big may not be beautiful.. Tata Motors is not an innovative company and its survival/success now depends on the approach/failures of non-automobile companies like Google etc. who will send shivers down its spine in the foreseeable future.
ReplyDeleteThe Tata conglomerate runs like a red-tape laden government and it takes years for it to change/innovate/catch up with StartUps. It may outshine all in the industry in the short term but will be an also ran in medium and long term.
The Era of companies like Tata Motors is over.
On the whole your articles are not the run of the mill kind and make good reading. I thank my friend who recommended the blog to me.
I am flattered that the blog was recommended & glad that you enjoyed reading.
DeleteTata's do have this perception of red-tapism yet they have grown 10 fold in revenues in the last decade & 5 fold in profitability, market cap. They were the 2nd biggest group a decade ago by market cap now they are the biggest, infact bigger than the next 4 houses put together.
The tech race is interesting. Stock prices suggest Tesla leads. It has been producing cars for 9 years. Despite all the fan following & funding they have not met a single delivery timeline & profitability is elusive. Infact they have voiced their interest in being a technology supplier quite like Bosch. Tesla trades at 8x sales with no profits to show & a market cap of $32bn while Tata Motors is at 0.5x sales generating quarterly cash flows close to Tesla's sales numbers. To me Tesla appears are far riskier bet vs the other players like BMW, Mercedes or Tata Motors(JLR) where the market seems to pricing doomsday.
The evolution of JLR over the last few years to me suggests, it is the beginning of an era. I am hoping it will be in the price much sooner though.
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ReplyDelete