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Tata Motors
JLR's volume-growth story has a lot of steam
We note that JLR’s global volumes (ex-China) is still 25% off peak (210k in FY11
ex-China compared to 280k in 2007). JLR is very good play on recovery in
developed economies (US, UK and Europe), in addition to a play on the continued
growth of premium cars in China.
There is strong underlying demand for JLR, as evidenced by 4-6 week waiting
periods for its products.
The Chinese government’s assurance, as a part of the Britain-China trade deal,
has done away with concerns about government policy hampering volume growth.
Agreement between JLR UK and JLR China for 40k vehicles in 2011; incremental
volumes from China would account for 40% of our growth estimate for JLR in
FY12.
Expect JLR's December quarter margins to surprise positively
JLR has clocked 63k in December quarter, up 15% q-q. Even if we assume fixed
costs were 10% of revenues, a 15% q-q volume increase should bring in 120bp of
EBITDA margin improvement.
This operating leverage benefit should help completely off-set the negative q-q
cross-currency impact.
Most on the Street are building a 15.0-15.5% EBITDA margin for the December
quarter compared to 16.6% in September quarter.
Upcoming catalysts:
Positive surprise on JLR margin in the December quarter results.
Increase in monthly volumes as engine supply from Ford increase, following Ford’s
engine plant de-bottlenecking this quarter.
Launch of Evoque: Our recent meeting with management revealed that it is
targeting 50k in the first year, a big delta on its total volume of 235-240k this year.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Motors
JLR's volume-growth story has a lot of steam
We note that JLR’s global volumes (ex-China) is still 25% off peak (210k in FY11
ex-China compared to 280k in 2007). JLR is very good play on recovery in
developed economies (US, UK and Europe), in addition to a play on the continued
growth of premium cars in China.
There is strong underlying demand for JLR, as evidenced by 4-6 week waiting
periods for its products.
The Chinese government’s assurance, as a part of the Britain-China trade deal,
has done away with concerns about government policy hampering volume growth.
Agreement between JLR UK and JLR China for 40k vehicles in 2011; incremental
volumes from China would account for 40% of our growth estimate for JLR in
FY12.
Expect JLR's December quarter margins to surprise positively
JLR has clocked 63k in December quarter, up 15% q-q. Even if we assume fixed
costs were 10% of revenues, a 15% q-q volume increase should bring in 120bp of
EBITDA margin improvement.
This operating leverage benefit should help completely off-set the negative q-q
cross-currency impact.
Most on the Street are building a 15.0-15.5% EBITDA margin for the December
quarter compared to 16.6% in September quarter.
Upcoming catalysts:
Positive surprise on JLR margin in the December quarter results.
Increase in monthly volumes as engine supply from Ford increase, following Ford’s
engine plant de-bottlenecking this quarter.
Launch of Evoque: Our recent meeting with management revealed that it is
targeting 50k in the first year, a big delta on its total volume of 235-240k this year.
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