InvestorQ : Should I invest in EICHER, Tata Motors and TVS Motors?
Pranit Sharma made post

Should I invest in EICHER, Tata Motors and TVS Motors?

Answer
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Tarun Madaan answered.
12 months ago


All the 3 stocks you have mentioned are in the auto sector and the sector is currently going through a major slowdown. Apart from the slowdown in sales due to weak demand and weak consumption, the stocks have also corrected because the dearth of NBFC funding is making it hard to buy these vehicles. So there is a structural issue pertaining to demand for their products. In this background, let me tell you what to do in each of the above cases.

Eicher Motors: The stock was always commanding a very healthy P/E ratio but in the last one year the stock has corrected nearly 45% from Rs.30,000 to as low as Rs.16,000. The company has seen some compression in sales and in profits but at the current price, the downside risk is not too much. You can look to keep accumulating Eicher gradually at around these levels or rat lower levels but take a perspective of at least 2 years from here.

Tata Motors: This stock has been among the worst performers in the auto space and has lost nearly 70% from its peak. There are quite a few factors that are working against this company. Firstly, its largest business division, Jaguar Land Rover, is seeing a slowdown in the large Chinese market. Secondly, the company is based in the UK and it is faced with BREXIT uncertainty. In the event of a no-deal BREXIT, the JLR division could have to shift from the UK and that would entail a huge cost for the company. Lastly, the domestic market is also performing quite badly as is evident in the 31% fall in the sales numbers in July. You can look to buy the stock at the current levels, but you must keep a stop loss below Rs.100 and exit around that level.

TVS Motors: the stock has also corrected in the last one year and has lost over 40%. Here again, this stock caters to the entry-level bike market and hence it has constraints in terms of picking up market share in the short run. But it is a good stock to hold in your portfolio. But if you are looking at two-wheelers you may prefer Bajaj Auto which is more immune due to its strong global franchise.