Tata Motors - biggest winner from GST, Brexit


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The passage of GST means free flow of goods from any part of the country to any other part of the country. Trucks will no longer have to stop for hours together to get a permit, and can actually be driven for 15-16 hours a day.

The typical truck in India is driven only for 8-10 hours a day, and the remaining time it is stuck for various issues - maintenance, break down, and the notorious delays at state borders and check points for getting "clearance".

This means that there has been a tremendous disincentive to actually upgrade trucks in India. If a truck is not going to run much anyway, why would you want to pay the capital costs of changing that to a new truck?

In fact, most of the trucks that are on the highways today would be hardpressed to be operated for 15-16 hours!

Once GST comes in, we could see shifts in behavior, with 2 drivers in a truck, and some trucks even being operated without much breaks for 20-22 hours a day! The speed to market and the flexibility that this allows will more than pay for the cost of the additional driver.

Tata Motors, being the largest player in the Commercial Vehicles segment will see the biggest boost to demand from this change in behavior.

The passenger vehicles division of Tata Motors will also benefit because of lower excise duty. Tata Motors is the largest seller of small diesel cars in India, and they will be the biggest beneficiary of the drop in Excise duty. This will allow them to make the switch to clean diesel engines without increasing cost of the vehicle, thus solving the environmental impact issue as well.

The best part is, the stars seem to be aligning for Tata Motors in a powerful way. Brexit was initially seen as a major negative for the JLR division of Tata Motors, but gradually opinion is shifting that this could be a major positive for Tata Motors.

Tatas will benefit out of Pound Depreciation, which will allow them to sell British manufactured cars cheaper in other countries. Secondly, initially people thought that JLR would lose access to Europe, and therefore lose its biggest market. As it turns around, European car makers sell FIVE times as many luxury cars in Britain, as JLR sells WORLDWIDE! So if there is any loss of market access, it will actually hurt European car makers more! JLR might see better domestic sales within the UK, as Audi, BMW, Mercedes, Ferrari, Lamborghini and other luxury brands in Europe find it tougher to sell in the UK! It is highly unlikely that Europe will shoot itself in the foot and deny access to JLR, because if they do, UK will also deny access to European car makers into Britain!

JLR turnaround has more or less completed, and it has been seeing phenomenal sales increases. What started with the Landrover Evoque has continued into other models.

In coming years, Tatas will also benefit from JLR quality percolating to other parts of the company, as well as frugal engineering pioneered by Tatas helping JLR lower costs. These are powerful drivers to make Tata Motors into a multi-bagger.

Tata Motors is available at just over 10x PE Ratio if you buy the DVR shares, which also have a better dividend. Considering that Tatas are the only player to operate in Commercial and Passenger segments, they are positioned to benefit the most from the current scenario.


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August figures from JLR are simply mind boggling - can you imagine important segments of the company growing at 188% and at 15%, but stock (DVR) is available at just 10x earnings?

New products as well as Pound depreciation seems to be kicking in big time, as predicted.


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I hope at least a few people read this analysis and benefitted. The entire equity analyst community has missed this story. People focussed on FX hedge losses of JLR, without considering the gains from pound devaluation!

Even if you missed the story upfront, JLR is a long term positive play. The DVR will be a multi-bagger from these levels also! Check out the news from Aston Martin recently - where they clearly say they are getting massive benefits out of pound devaluation. This is not just a pound devaluation story - JLR will actually benefit from Brexit long term.

The fundamental stories in Coal India and Sun Pharma are also equally compelling, and the stocks are still available at very attractive levels. Reliance is a story where you can simply lock up the stock and throw away the key - don't even look at it for another 10 years. You cannot understand the story - so don't even try to!


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Heard something very interesting - why the DVRs of Tata Motors are trading at a huge discount, while the DVRs of other companies are trading at parity or even at a premium. The reasoning potentially has to do with the current stake that Tata Sons have in Tata Motors - they probably want a higher stake and more control in Tata Motors.

I was stunned when Cyrus Mistry made a statement that Tata Motors stock is not for the weak of heart - how can any MD talk this way about his own company? And I was even more stunned when Ratan Tata (on a recent visit to London) made very disparaging remarks about the work culture of the JLR management - about how they leave early to catch 5pm train, not respecting that top management from India is visiting, etc.

It almost looks like Tatas are not happy with Tata Motors shares going up - because they don't have enough of a stake at this point!!

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