Rakesh Jhunjhunwala stock: This Big Bull holding gets a target hike I Details here

Rakesh Jhunjhunwala holds 1.29% stake or 4 cr shares in Tata Motors. Tata Motors was the new addition into Rakesh Jhunjhunwala’s portfolio during Covid period. Titan is the other big Tata group stock that the Big Bull Rakesh Jhunjhunwala holds in his portfolio. Tata Motors share price has multiplied 5 times from the lows that it made during the covid period. Tata Motors share price today is Rs 325, up Rs 2 or 0.7%.

Strategy, Outlook and Rating:

JLR has scheduled its Analyst day for 26 February, while its top-down strategy was released on 15 February. HSBC dig deeper into the key pillars of this renewed strategy and also highlight some unanswered aspects of the strategy, where HSBC would like to see clarification at the analyst day.

See Zee Business Live TV Streaming Below:

The heart of the strategy is premised on fixed cost rationalisation in HSBC’s view. It is certain and well understood that all Auto OEMs have to move to EVs in the coming years. However, what is less understood is how painful the transition from ICE (Internal Combustion Engine) to EVs (Electric Vehicles) will be. OEMs incur huge fixed costs on maintaining a large portfolio of ICE engines – R&D, employees and facilities.

JLR’s strategy provides strong insights and comfort on that transition. Broadly, JLR has outlined its intention to reduce platforms from 6 to around 3. In our view – those 3 platforms (MLA, EMA, Jag-EV) are a manifestation of the MLA platform itself and do not add much more complexity or cost. Even in terms of employees, JLR may continue to rationalise and re-factor the employee workforce.

HSBC sees continued reduction in ICE and reallocation to EVs. Finally, facilities will be consolidated to realise synergies across models depending on the platform. Solihull for Range Rovers (RRs) and Jag-EVs (so MLA and Jag-EV platform); Halewood for EMA (for small Land Rovers) and Bromwich for other non-production work – such as prototyping

The second and obvious pillar of the strategy is the electrification of the fleet. Jaguar is expected to be totally electrified by 2025. Jaguar BEV (battery EV) is a natural and easy choice as Jaguars design / style suits BEV style: sleek, low and aerodynamically sound. Six EV Land Rovers by 2025, all electric Jag portfolio by 2025 and all nameplates to have BEVs by 2030 all show the aggressive EV onslaught by JLR. As discussed in our previous notes, R&D spend of GBP 2.5bn seems adequate in the near-term as heavy lifting around the MLA platform is already behind JLR.

HSBC raised their SOTP target price to Rs 380 (from Rs 320) led by compelling and strong plans to turn around JLR and the domestic business. Stay Buy on Tata Motors.