5 Tata Group Stocks that are Rallying Hard. And What the Future Holds for Them...

Indian share markets extended losses for the third day on Friday with the Sensex slumping over 1,000 points and turning negative for the year.

Fears of a possible global recession after interest rate hikes by the Fed and central banks all over the world, hurt investor sentiment.

However, despite this bloodbath, there are stocks that are up considerably in 2022. It's also no surprise they belong to the Tata Group.

Here are the top five. Read on to find out why they have rallied and what the future holds for them.

#1 TRF

The first stock on our list is TRF.

The stock is up a whopping 160.7% in 2022 against a 1.8% decline in the Sensex.

The massive surge in the stock price could be attributed to the scrip being excluded from the Graded Surveillance Measure (GSM) surveillance on 12 September 2022.

Graded surveillance measure is a method used by the market regulator to keep a tab on the unrealistic price and demand rise of stocks that are not in tandem with the financial health and fundamentals of the company.

TRF has over the years executed various electromechanical jobs for bulk material handling equipment. It is also engaged in the production of such material handling equipment at its manufacturing facility at Jamshedpur.

Further, the company is engaged in providing services relating to design and engineering, supervision, etc.

Over the last five years, the company's sales have shown a de-growth of 25% (CAGR) while profit has only grown at a CAGR of 4%.

The company's financial performance continued to be weak even in the financial year 2022

leading to weak debt coverage indicators, weak capital structure, and negative net worth.

However, going forward, TRF is expecting large captive orders from Tata Steel in the steel sector and will continue to pursue opportunities related to spares and O&M in the sector.

It is also expected to benefit from the auction and operationalisation of non-working mines and ramp up of production in existing mines.

To know more about the company, check out its factsheet and quarterly results.

#2 Indian Hotels Company

The second on our list of top gainers is Indian Hotel Company Limited (IHCL).

The stock is up by 77.4% in 2022 on the back of a positive business outlook.

Investors are highly bullish on hotel stocks due to the upcoming festival season. Despite a rise in interest rate by various banks, big hotels such as Indian Hotels have not seen a drop in revenue.

As a result, the stock has been on an uptrend.

IHCL also recently announced its 'Ahvaan 2025' plan. Under this, IHCL will re-engineer its margins, re-imagine its brand scape, and restructure its portfolio.

The company aims to build a portfolio of 300 hotels, with 33% operating profit margin, and 35% share contribution from new businesses and management fees by the financial year 2025-26.

When discussing hotels in India, it is impossible not to acknowledge the Indian Hotels Company (IHCL). IHCL owns Taj, Vivanta, and Ginger, which are all well-known and elegant hotels.

As Covid-19 had an impact on the hotel industry, IHCL reported a loss for the financial years 2021 and 2022.

However, the company's numbers have improved since the lockdown restrictions were eased. IHCL reported a consolidated net profit of Rs 1.7 bn in the June 2022 quarter against a net loss of Rs 2.8 bn in the year ago period.

Its revenue stood at Rs 12.6 bn, steeply higher than Rs 3.4 bn recorded in the corresponding quarter previous year.

To know more about the company, check out its factsheet and quarterly results.

#3 Tata Investment Corporation

Third on our list is Tata Investment Corporation.

The company's shares are up 71.8% in 2022 because it is witnessing a surge in its dividend income, interest and profit on sale of investments.

Besides other stocks, the company has invested huge corpus in all Tata company stocks.

Tata Investment Corporation is an NBFC that was started in 1937, under the name The Investment Corporation of India. It remained a closely held company until 1959, when it listed on the stock exchange.

It invests in Tata and non-Tata companies, though investments in Tata companies constitute a larger portion of company's portfolio.

Here are the names of the listed companies that Tata Investments has a stake in.

• Tata Teleservices (Maharashtra)
• Tata Consultancy Services
• Tata Chemicals
• Tata Elxsi
• Tata Consumer Products
• Tata Motors
• Tata Power
• Tata Steel
• The Indian Hotels Company
• Titan Company
• Trent
• Voltas

The company has achieved a revenue growth of 12% (CAGR) in the last three years while its profit has grown at a CAGR of 11%.

Going forward, the company aims to invest in sector leaders that have potential to remain value accretive over the medium and long term.

The management will evaluate and select investments based on high quality governance, long term sustainability and strength of the investee company's balance sheets.

To know more about the company, check out its factsheet and quarterly results.

#4 Tata Elxsi

Fourth on the list is Tata Elxsi.

The stock is up 50% in 2022 on the back of strong earnings growth. The stock is a true multibagger. It was trading at around Rs 700 in September 2019, and now trades at Rs 9,000.

Tata Elxsi's performance has accelerated over the past few years. The company's revenue and profit has more than doubled in the past five years growing at a 5-year CAGR of 17% and 25%, respectively.

The return ratios have also been strong, averaging 30% in the past five years. Apart from this, the company has no debt on its books, allowing it to reward its shareholders generously. The five-year average dividend yield stands at 1.4%.

Tata Elxsi is a top global provider of design- based technology services across industries. It was one of the first companies launched by Ratan Tata after he took over as chairman of the Tata group.

Going forward, Tata Elxsi has charted its vision for 2023. This includes targeting 2x revenue, sustaining segment leading margins of 22% and mitigating business risk by branching out its revenue profile.

The company is making inroads into the transportation vertical, tapping into the growing electric vehicle (EV) market.

Apart from this, they are expanding their healthcare segment, which has risen 3x in the past two years. The company expects the revenue mix to skew more towards healthcare, 40% communication, and broadcasting, 40% transportation, and 20% healthcare.

To know more about the company, check out its factsheet and quarterly results.

#5 Trent

Last on our list is Trent.

Shares of the company are up 35.8% in 2022 driven by strong performances across its key formats, Westside and Zudio.

Established in 1998, Trent is a part of the Tata Group. The company is a leading player in the branded retail industry in India.

Trent has been consistently outperforming in its overall business since the last five years. For perspective, Trent's revenue has grown at a compound annual growth rate (CAGR) of 17.4% over FY17-22 versus a drop of over 7% for Shoppers Stop.

For the financial year 2022, the company's revenue stood at Rs 46.7 bn, higher by 73% YoY as lockdown restrictions eased. Net profit of the company stood at Rs 346 m. The company had recorded a loss of Rs 1.8 bn in the same quarter last year.

Going forward, the management is confident in maintaining the expansion and growth momentum in the financial year 2023 for Westside and Zudio both.

Given the significant retailing-experience (in private labels) and superior business-model compared to competition, Trent is set to disrupt the mass segment.

Emerging sectors like beauty and personal care, will also help the drive top line growth for the company.

To know more about the company, check out its factsheet and quarterly results.

Tata Stocks are Rallying. Should You Jump in too?

"I think the house of Tatas is blessed by God".

This is how India's veteran investor Rakesh Jhunjhunwala described the conglomerate.

And we believe he is correct in his assessment.

However, these days, the stock market is extremely volatile. Trends are impossible to forecast. Companies with solid fundamentals are also suffering.

Even companies with strong financials cannot withstand the downturn. Therefore it is important to do due diligence when considering any investment.

To know more about the Tata group, check out the video below by Co-head of Research at Equitymaster, Rahul Shah, where he unveils if Tata Group is a genuine wealth creator for investors in India.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...