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Tata Motors
JLR strong performance to continue
JLR sales volume surprised us (6% mom, 32% yoy growth) driven by Land Rover
reaching second best monthly volume since CY09. With European premium car
makers guiding for strong CY11 and Tata management contact reassuring
profitable volume growth, we reiterate Buy with ahead of consensus estimates.
JLR sales volume impress with 6% mom growth in seasonally weak Feb month
! Land Rover records impressive 32.6% yoy and 6.4% mom growth to scale 18,440 vehicles,
the second best monthly sales volume in last 2-years (best in March 2010 at 18,896).
! Jaguar car sales volume dip 2.4% yoy but +5.1% mom from recent low in January.
! Feb is traditionally weak month as car sales in its largest market UK are postponed to March
for number plate change phenomenon. Hence, the JLR volume surprise us by 13.9% and
product mix gets richer towards profitable Land Rover.
European Premium car makers guide for strong CY11
! Audi in its management guidance said its CY10 EBIT margin of 9.4% was likely to be
achieved again in CY11 (4QCY10 margins at 11.3%).
! Audi management expects the premium car market in China to grow at 16.3% in CY11F from
688,000 units in FY10 to 800,000.
! BMW management guidance- Automobile EBIT margin for CY11F are expected at over 8%
(CY10- 8%) with CY12F margins are expected to be in the range of 8-10%. CY11F sales
volume is guided to cross 1.5mn vehicles mark (CY10-1.46mn).
! Deriving from European premium car makers guidence, we feel Tata JLR is oncourse to
deliver RBS estimate of 20% sales volume growth from new product launches and reach
16.4% EBITDA margin (16.7% in FY11F march ending).
Management reiterates sustenance of JLR growth and superior profitability
! Our recent management meeting highlights that it will continue to focus on taking cost out of
the system for JLR, as premium cars is a margin focused busines and not a volume game.
! For volume expansion, management expects the planned launch of Range Rover Evoque in
July 2010 in 2WD and 4WD can help expand price offering of its premium brand Rnage
ROver and inturn expand addressable market.
! For China, management expects the benefit of local partner to come-in from end of CY12 as
regulator approval takes time. Till then, it plans to supply completely built units to China for
growth.
! For medium-term JLR plans to rationalise number of platforms from current 8 to 5, whoose
process will kick-off with all alluminium Range Rover launch in 2012.
! Initial low cost sourcing benefits have been impressive in JLR - as it has improved LCC
component sourcing from 17% of total requirment during ford times to 24% now. It plans to
reach to 32% in coming years. Similarly in IT procurment (GBP100mn per annum), it has
been able to source CAD/CAM requirements.
! Management sees scope to reduce JLR warranty cost from current 4% of net sales to
industry best of 2% in medium-term for which it is in process of benchmarking its production
processes to best in class.
! Interms of JLR currency hedging, it guided for its hedging policy of taking hedges for 35-55%
of rolling four quarter net exposure in a particular currency. This, management feels will give
them protection for 5-7% currency fluctuation in short-term.
! Interms of engine sourcing, management highlighted Ford to continue on take or pay basis till
2020 for existing engine range. Whereas for new entry level engines like 1.6-2.0 liter engines,
it plans to explore development and production in India in medium-term.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tata Motors
JLR strong performance to continue
JLR sales volume surprised us (6% mom, 32% yoy growth) driven by Land Rover
reaching second best monthly volume since CY09. With European premium car
makers guiding for strong CY11 and Tata management contact reassuring
profitable volume growth, we reiterate Buy with ahead of consensus estimates.
JLR sales volume impress with 6% mom growth in seasonally weak Feb month
! Land Rover records impressive 32.6% yoy and 6.4% mom growth to scale 18,440 vehicles,
the second best monthly sales volume in last 2-years (best in March 2010 at 18,896).
! Jaguar car sales volume dip 2.4% yoy but +5.1% mom from recent low in January.
! Feb is traditionally weak month as car sales in its largest market UK are postponed to March
for number plate change phenomenon. Hence, the JLR volume surprise us by 13.9% and
product mix gets richer towards profitable Land Rover.
European Premium car makers guide for strong CY11
! Audi in its management guidance said its CY10 EBIT margin of 9.4% was likely to be
achieved again in CY11 (4QCY10 margins at 11.3%).
! Audi management expects the premium car market in China to grow at 16.3% in CY11F from
688,000 units in FY10 to 800,000.
! BMW management guidance- Automobile EBIT margin for CY11F are expected at over 8%
(CY10- 8%) with CY12F margins are expected to be in the range of 8-10%. CY11F sales
volume is guided to cross 1.5mn vehicles mark (CY10-1.46mn).
! Deriving from European premium car makers guidence, we feel Tata JLR is oncourse to
deliver RBS estimate of 20% sales volume growth from new product launches and reach
16.4% EBITDA margin (16.7% in FY11F march ending).
Management reiterates sustenance of JLR growth and superior profitability
! Our recent management meeting highlights that it will continue to focus on taking cost out of
the system for JLR, as premium cars is a margin focused busines and not a volume game.
! For volume expansion, management expects the planned launch of Range Rover Evoque in
July 2010 in 2WD and 4WD can help expand price offering of its premium brand Rnage
ROver and inturn expand addressable market.
! For China, management expects the benefit of local partner to come-in from end of CY12 as
regulator approval takes time. Till then, it plans to supply completely built units to China for
growth.
! For medium-term JLR plans to rationalise number of platforms from current 8 to 5, whoose
process will kick-off with all alluminium Range Rover launch in 2012.
! Initial low cost sourcing benefits have been impressive in JLR - as it has improved LCC
component sourcing from 17% of total requirment during ford times to 24% now. It plans to
reach to 32% in coming years. Similarly in IT procurment (GBP100mn per annum), it has
been able to source CAD/CAM requirements.
! Management sees scope to reduce JLR warranty cost from current 4% of net sales to
industry best of 2% in medium-term for which it is in process of benchmarking its production
processes to best in class.
! Interms of JLR currency hedging, it guided for its hedging policy of taking hedges for 35-55%
of rolling four quarter net exposure in a particular currency. This, management feels will give
them protection for 5-7% currency fluctuation in short-term.
! Interms of engine sourcing, management highlighted Ford to continue on take or pay basis till
2020 for existing engine range. Whereas for new entry level engines like 1.6-2.0 liter engines,
it plans to explore development and production in India in medium-term.
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