Reviews
In this edition, we have reviewed Tata Motors Ltd. and Himadri Specialty Chemicals Ltd. We suggest our reader-investors to HOLD in Tata Motors Ltd. and Himadri Specialty Chemicals Ltd
We had recommended Tata Motors Ltd. in Volume 36, Issue No. 5, dated January 18-31, 2021, under the ‘Analysis’ segment. The recommended price for the stock was Rs267.4. We had recommended the stock on the basis of the strong determination of the company to overcome any challenges and improving financial performance.Tata Motors is an Indian multinational automotive manufacturing company, headquartered in Mumbai, and is a part of Tata Group. The company produces passenger cars, trucks, vans, coaches, buses, sports cars, construction equipment and military vehicles.
The consolidated quarterly financial performance of the company indicates that on a consolidated quarterly basis the net sales and other operating income were recorded at Rs66,406.45 crore in Q1FY22 as compared to Rs31,983.06 crore in Q1FY21, recording a robust rise. The operating profit jumped from Rs1,289.23 crore in Q1FY21 to Rs5,824.27 crore in Q1FY22. The net loss lowered in the quarter and registered at Rs4,320.60 crore in Q1FY22 as compared to a net loss of Rs8,384.22 crore in Q1FY21.On the annual front, the net sales and operating income dipped by 4.32 per cent from Rs2,61,067.97 crore in FY20 to Rs 2,49,794.75 crore in FY21. The operating profit was Rs 34,930.62 crore in FY21 as compared to Rs20,960.22 crore recorded in FY20.
FY21 reported a net loss of Rs13,016.14 crore whereas the net loss was recorded at Rs10,975.23 crore reported in FY20. Tata Motors faced closure in the India business and a chip shortage in the JLR business in Q1FY22. The decent operating performance was backed by a favourable mix in both businesses. Looking beyond the short-term issues, good traction is expected in the JLR and India businesses. Tata Motors is predicted to reap benefits of macro recovery, company-specific volume and margin drivers as well as a strong recovery in free cash flows and leverage in the JLR and India businesses. Hence, we recommend HOLD.
We had recommended Himadri Speciality Chemicals Limited in Volume 36, Issue No. 5, dated January 18-31, 2021, under the ‘Special Report’ segment. The recommended price for the stock was Rs45.05. We had recommended the stock on the basis of a positive outlook regarding the company’s growth and its position in the speciality chemical sector. Himadri Speciality Chemical is primarily engaged in the manufacturing of carbon materials and chemicals. Over the years, with its core products and value-added by-products, the company has established itself as one of the world’s most extensive value chains in the carbon segment.
The standalone quarterly financials of the company reported that the net sales and other operating income were recorded at Rs539.75 crore in Q1FY22 as compared to Rs257.87 crore in Q1FY21, reporting robust growth. The operating profit ascended attractively from Rs8.26 crore in Q1FY21 to Rs37.77 crore in Q1FY22. The net loss of Q4FY20 turned positive with a net profit of Rs15.74 crore in Q1FY22 as against a net loss of Rs9.49 crore in Q1FY21. On the annual front, the net sales and operating income descended by 7 per cent from Rs1,805.80 crore in FY20 to Rs1,679.46 crore in FY21. Meanwhile, the operating profit dropped by 49.71 per cent in FY21 at Rs144.97 crore as compared to Rs288.28 in FY20.
The net profit on an annual basis plunged by 76.98 per cent at Rs47.27 crore in FY21 as compared to Rs205.35 crore in FY20. The in-house research and development team has enabled Himadri Speciality Chemicals to forward integrate and regularly launch new specialised products as well as improve the quality of the existing products significantly. The company has been introducing new brands with multiple grades catering to different application segments of speciality carbon black. It is also making constant efforts for reducing energy consumption in certain processes. The company’s future strategy aims at having a high-value product pipeline bearing the right capacity, a strong clientele, and product leadership with strong research and development and cutting-edge technologies. Hence, we recommend HOLD.
(Closing price as of Aug 20, 2021)