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The June quarter normalized consolidated result surprised us by 5% on both EBITDA and
PAT levels on better than expected JLR results. Despite global slowdown, management
expects volume growth in JLR to remain strong. With new product launches ahead at both
JLR and standalone level, we maintain Buy.
Consolidated EBITDA came 5% above forecasts
Net sales Rs.335.7bn, up 24.1%yoy but down 5.7%qoq. RBS estimate was Rs.329.0bn
EBITDA Rs.44.6bn, up 12.9%yoy but down 7.4% qoq. RBS as well as Bloomberg
consensus estimate were Rs.42.7bn, so 5% above expectations.
EBITDA margins came at 13.3%, down 25bps qoq. RBS estimate was 13.0%.
Raw material to sales rose 233bps yoy but remained flat qoq to 65.3% of net sales.
Interest expenses (adjusted for one time financing cost and prepayment expenses of
about £20mn at JLR) came at Rs.6.2bn, +36% qoq. RBS est was Rs.4.66bn.
Effective tax rate came at 14.1% vs 10.5% in 4QFY11 and 11.9% in FY11. RBS est was
12.6%. The higher tax rate was mainly due to higher tax at Chinese sales company.
Normalised PAT post minority came at Rs.21.4bn, up 5.6% yoy but down 13% qoq. This
was 5% above our forecasts but in line with Bloomberg consensus of Rs.21.7bn.
Normalized EPS was Rs.32.3 for quarter.
Automotive net debt to equity was at 0.69 versus 0.68 as at end FY11. While receivables
days declined sharply to 16 from 20 as at end FY11.
JLR outperformed forecasts on PBT
Net sales GBP2.71bn, +19.9%yoy and flat qoq. RBS estimate was GBP2.68bn
EBITDA GBP408mn, up 16%yoy, down 2% and 4% above RBS estimate of GBP393mn.
EBIDTA margin was 15.1%, down 40bps yoy but above RBS estimate of 14.7%.
Normalized PBT (adjusted for came at GBP269mn, up 14% yoy but down 11% qoq. RBS
estimate was GBP248mn.
Normalized PAT came at GBP239mn, up 7.6% yoy and 7% above RBS estimate of
GBP223mn.
Normalized PAT came at GBP239mn, up 7.6% yoy and 7% above RBS estimate of
Capex during the quarter was GBP370mn; in line with full year target of GBP1.5bn
Standalone: In line results
Net sales was Rs.119.0bn, up 14.2%yoy but down 18.5%qoq. In line with our forecasts.
EBITDA came at Rs.9.99bn, down 15%yoy and 22%qoq. RBS estimate was Rs.10.1bn, so
just 1% below expectations.
EBIDTA margin was 8.4%, down 288bps yoy and 40bps qoq. RBS estimate was 8.5%.
Normalized PBT is Rs.4.05bn, down 33% yoy and down 37% qoq. RBS estimate was
Rs.4.32bn.
Normalized PAT came at Rs.3.40bn, down 26% yoy and 46% qoq. About 2% below RBS
estimate of Rs.3.46bn. Normalized EPS for the quarter came at Rs.5.1.
Management conference call highlights
Management noted that wholesale JLR sales volume was below retail volumes due to
planned inventory corrections and some capacity constraints in Land Rover. It expects
volume growth in JLR to be strong FY12 with new Evoque and refurbished XF launch in
September .
It also said that it is trying to rebuild the Jaguar brand in US and China market in order to curb
the declining volumes by increasing its dealership and marketing expenditure.
Management stated that JLR margins would remain under stress as against last year due to
tough economic environment impacting pricing power and exchange rate pressure. It says
that cost cutting measures should help in maintaining margins.
It also said that product development and R&D expenses at JLR would be around 10-11% of
the sales on a long term basis; while for the next two years it would be around 13-14% if the
top line.
The management also noted that it is increasing its dealership strength and focusing more on
advertisements and marketing to retrace its lost market share in domestic passenger car
market.
The company will be adding LCV specific dealers to its portfolio to penetrate into the rural part
of India where it sees significant growth for its LCV (particularly ACE family) vehicles.
The M&HCV segment yoy volume growth of 5.4% in 1Q was higher than the industry volume
growth of 3.6%. LCV segment also grew 18.8%, higher than the industry growth of 17.3%.
Management said that demand in India remains a concern due to high inflation, higher fuel
prices and rising interest rates but believe that infrastructure spending could benefit the CV
market.
Recent weakness in price provides good upside; we maintain Buy
In our view, the recent weakness in stock (down 27% in last three months) is unwarranted as
the company continued to perform well. Despite the ongoing macro economic headwinds, we
believe that premium car segment would continue to do better than the overall passenger car
segment. At recent price, the stocks trades at just 5.21x our FY12F PE. We maintain Buy
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The June quarter normalized consolidated result surprised us by 5% on both EBITDA and
PAT levels on better than expected JLR results. Despite global slowdown, management
expects volume growth in JLR to remain strong. With new product launches ahead at both
JLR and standalone level, we maintain Buy.
Consolidated EBITDA came 5% above forecasts
Net sales Rs.335.7bn, up 24.1%yoy but down 5.7%qoq. RBS estimate was Rs.329.0bn
EBITDA Rs.44.6bn, up 12.9%yoy but down 7.4% qoq. RBS as well as Bloomberg
consensus estimate were Rs.42.7bn, so 5% above expectations.
EBITDA margins came at 13.3%, down 25bps qoq. RBS estimate was 13.0%.
Raw material to sales rose 233bps yoy but remained flat qoq to 65.3% of net sales.
Interest expenses (adjusted for one time financing cost and prepayment expenses of
about £20mn at JLR) came at Rs.6.2bn, +36% qoq. RBS est was Rs.4.66bn.
Effective tax rate came at 14.1% vs 10.5% in 4QFY11 and 11.9% in FY11. RBS est was
12.6%. The higher tax rate was mainly due to higher tax at Chinese sales company.
Normalised PAT post minority came at Rs.21.4bn, up 5.6% yoy but down 13% qoq. This
was 5% above our forecasts but in line with Bloomberg consensus of Rs.21.7bn.
Normalized EPS was Rs.32.3 for quarter.
Automotive net debt to equity was at 0.69 versus 0.68 as at end FY11. While receivables
days declined sharply to 16 from 20 as at end FY11.
JLR outperformed forecasts on PBT
Net sales GBP2.71bn, +19.9%yoy and flat qoq. RBS estimate was GBP2.68bn
EBITDA GBP408mn, up 16%yoy, down 2% and 4% above RBS estimate of GBP393mn.
EBIDTA margin was 15.1%, down 40bps yoy but above RBS estimate of 14.7%.
Normalized PBT (adjusted for came at GBP269mn, up 14% yoy but down 11% qoq. RBS
estimate was GBP248mn.
Normalized PAT came at GBP239mn, up 7.6% yoy and 7% above RBS estimate of
GBP223mn.
Normalized PAT came at GBP239mn, up 7.6% yoy and 7% above RBS estimate of
Capex during the quarter was GBP370mn; in line with full year target of GBP1.5bn
Standalone: In line results
Net sales was Rs.119.0bn, up 14.2%yoy but down 18.5%qoq. In line with our forecasts.
EBITDA came at Rs.9.99bn, down 15%yoy and 22%qoq. RBS estimate was Rs.10.1bn, so
just 1% below expectations.
EBIDTA margin was 8.4%, down 288bps yoy and 40bps qoq. RBS estimate was 8.5%.
Normalized PBT is Rs.4.05bn, down 33% yoy and down 37% qoq. RBS estimate was
Rs.4.32bn.
Normalized PAT came at Rs.3.40bn, down 26% yoy and 46% qoq. About 2% below RBS
estimate of Rs.3.46bn. Normalized EPS for the quarter came at Rs.5.1.
Management conference call highlights
Management noted that wholesale JLR sales volume was below retail volumes due to
planned inventory corrections and some capacity constraints in Land Rover. It expects
volume growth in JLR to be strong FY12 with new Evoque and refurbished XF launch in
September .
It also said that it is trying to rebuild the Jaguar brand in US and China market in order to curb
the declining volumes by increasing its dealership and marketing expenditure.
Management stated that JLR margins would remain under stress as against last year due to
tough economic environment impacting pricing power and exchange rate pressure. It says
that cost cutting measures should help in maintaining margins.
It also said that product development and R&D expenses at JLR would be around 10-11% of
the sales on a long term basis; while for the next two years it would be around 13-14% if the
top line.
The management also noted that it is increasing its dealership strength and focusing more on
advertisements and marketing to retrace its lost market share in domestic passenger car
market.
The company will be adding LCV specific dealers to its portfolio to penetrate into the rural part
of India where it sees significant growth for its LCV (particularly ACE family) vehicles.
The M&HCV segment yoy volume growth of 5.4% in 1Q was higher than the industry volume
growth of 3.6%. LCV segment also grew 18.8%, higher than the industry growth of 17.3%.
Management said that demand in India remains a concern due to high inflation, higher fuel
prices and rising interest rates but believe that infrastructure spending could benefit the CV
market.
Recent weakness in price provides good upside; we maintain Buy
In our view, the recent weakness in stock (down 27% in last three months) is unwarranted as
the company continued to perform well. Despite the ongoing macro economic headwinds, we
believe that premium car segment would continue to do better than the overall passenger car
segment. At recent price, the stocks trades at just 5.21x our FY12F PE. We maintain Buy
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