Hello Tata 2.0!

Everyone who has met me knows how bullish I’ve been on Tata Motors for the past four five years. The logics have been dweleved into the namesake blogs multiple times. So what triggers this one!

An innocuous notification on the Stock-Exchange’s website today states that TaMo is going to consider declaring dividend in its next board meeting scheduled on the 12th of May. This sounds innocent and doesn’t suggest anything unless you take into account that the last time TaMo declared a dividend was in 2016! The share price has languished well below the price it hit in September 2015&2016 which is just above and below ₹600. Now the fact that it’s coming off a mega year loss making cycle and spree of debt reduction measures which has emboldened enough to dole out money as cash dividend means only one thing- the turnaround is over and the company is sure enough to mint money going forward.

Whenever a loss making entity has finally turned profit, stocks have rallied the most. Be it Amazon in 2003-04 or Airtel in early 2000s or even Tesla in 2010s, the moment a loss making company with extremely high fixed costs turn into black, the operating leverage kicks in and the profitability rises exponentially. It’s not a coincidence that company has made all the right noises about making JLR profitable with a much reduced break even volume requirements and selling highest ever cars in Indian markets.

The time for the stock to come out and deliver fabulous profits has arrived. The kind of sales it does, we’ll over $10B every quarter, it is not too far fetched to imagine it making around $500M to $1B a quarter going forward. If nothing happens magically on the flip-side, TaMo will deliver FCF of almost a couple of Billion Dollars every year at the least. It’s then trading at hardly 15x FCF yield which means the stock can easily double from here without being expensive.

Not everyday such moments come in a stock investors life when this kind of move is anticipated! I’m sure this is that point when TaMo will finally rally towards making a new life high, just like ITC at 200 quickly rallied to 425 and counting.

PS: Oracle has just made its 52W high and still trading at 17x trailing earnings with 6% yield! This can’t be true unless it at least a goes up 40-50% ! Fingers crossed