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JLR conference call highlights
Key takeaways from JLR’s FY11 results conference call – 1) Demand is weak
in UK and Europe but China, Russia and North America are compensating; 2)
Evoque is seeing a strong response with advance bookings of ~20K units.
Evoque margins seem to be decent as per comments; 3) The rise in incentives
was attributed to unilateral discounts by dealers and model change effects; 4)
JLR is targeting flat margins in FY12 over FY11; 5) JLR is aiming to double
China dealers to 100 by 2011-end but the China plant is delayed. We maintain
our estimates pending 1Q results on 11th Aug. Till then, maintain O-PF.
Management didn’t sound too concerned on demand
Management said that demand is most weak in the UK followed by continental
Europe. However, demand is much better in China (up 48%), Russia (up 57%)
and North America. Jaguar weakness was attributed to the upcoming new ‘XF’
launch due to which the current ‘XF’ has slipped. Overall commentary on demand
was more positive than we expected.
Very positive on ‘Evoque’
Outlook on the ‘Evoque’ is very positive. Evoque has got ~20K advance bookings
and 0.25m people have registered interest on the website. No significant
cannibalization is expected. Deliveries to dealers will start in Aug and retail sales
will commence in Sep, pointing to a jump in monthly sales in coming months.
Management commented that ‘contribution margins/vehicle on the Evoque are
higher than the Freelander but lower than the Range Rover Sport’. We are not
aware of the existing margins on the Freelander but the fact that Evoque margins
are better than even one of Land Rover’s existing products comes as a positive.
Not too concerned on margins either
Commentary on margins was also sanguine. Management said that input costs
have risen, currency has moved unfavourably and Evoque launch costs will come
through but is still targeting flat margins in FY12 over FY11 on the back of cost
efficiencies. Management attributed the rise in incentives to dealer discounts with
no liability on the company and also to model year change effects.
China plant is delayed; big expansion in China dealerships
JLR is still exploring alternatives with potential partners in China and said that a
China plant was not likely even in FY13. JLR’s China dealerships are set to double
to 100 by FY12-end. JLR is also looking at options to replace part of the engine
supply from Ford with self-made engines over 4-5 years. The aggressive R&D
accounting was attributed to Tata Motors accounting policy. Overall commentary
on all issues of concern was sanguine. We will relook our estimates and stance on
the stock post 1Q results on Aug 11h. Till then, O-PF stays.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JLR conference call highlights
Key takeaways from JLR’s FY11 results conference call – 1) Demand is weak
in UK and Europe but China, Russia and North America are compensating; 2)
Evoque is seeing a strong response with advance bookings of ~20K units.
Evoque margins seem to be decent as per comments; 3) The rise in incentives
was attributed to unilateral discounts by dealers and model change effects; 4)
JLR is targeting flat margins in FY12 over FY11; 5) JLR is aiming to double
China dealers to 100 by 2011-end but the China plant is delayed. We maintain
our estimates pending 1Q results on 11th Aug. Till then, maintain O-PF.
Management didn’t sound too concerned on demand
Management said that demand is most weak in the UK followed by continental
Europe. However, demand is much better in China (up 48%), Russia (up 57%)
and North America. Jaguar weakness was attributed to the upcoming new ‘XF’
launch due to which the current ‘XF’ has slipped. Overall commentary on demand
was more positive than we expected.
Very positive on ‘Evoque’
Outlook on the ‘Evoque’ is very positive. Evoque has got ~20K advance bookings
and 0.25m people have registered interest on the website. No significant
cannibalization is expected. Deliveries to dealers will start in Aug and retail sales
will commence in Sep, pointing to a jump in monthly sales in coming months.
Management commented that ‘contribution margins/vehicle on the Evoque are
higher than the Freelander but lower than the Range Rover Sport’. We are not
aware of the existing margins on the Freelander but the fact that Evoque margins
are better than even one of Land Rover’s existing products comes as a positive.
Not too concerned on margins either
Commentary on margins was also sanguine. Management said that input costs
have risen, currency has moved unfavourably and Evoque launch costs will come
through but is still targeting flat margins in FY12 over FY11 on the back of cost
efficiencies. Management attributed the rise in incentives to dealer discounts with
no liability on the company and also to model year change effects.
China plant is delayed; big expansion in China dealerships
JLR is still exploring alternatives with potential partners in China and said that a
China plant was not likely even in FY13. JLR’s China dealerships are set to double
to 100 by FY12-end. JLR is also looking at options to replace part of the engine
supply from Ford with self-made engines over 4-5 years. The aggressive R&D
accounting was attributed to Tata Motors accounting policy. Overall commentary
on all issues of concern was sanguine. We will relook our estimates and stance on
the stock post 1Q results on Aug 11h. Till then, O-PF stays.
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