Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
On the right track
Niche presence, new launches, wider market reach to be key drivers
Under Tata Motors parentage, JLR is all set to emerge as a bigger, better and
stronger global luxury vehicle player. It is taking several initiatives to fortify its
strength in luxury SUVs and improve its weak positioning in luxury car market.
Outlook for luxury vehicles remains positive, JLR can drive secular growth.
Land Rover commands strength; Evoque to drive growth, market share
gains.
Jaguar's niche presence offers significant headroom to grow.
China a big opportunity; JLR's local presence will boost competitiveness.
Improved volumes, market mix, cost efficiencies to offset cost push.
TTMT's domestic CV business has seen reduced volatility driven by higher
LCV contribution.
Outlook for luxury vehicles positive, JLR can drive secular growth
The luxury vehicle market will post CAGR of 8.9% to 9m units over 2011-15. We
expect China and BRIKT (Brazil, Russia, India, Korea and Turkey) to be key growth
drivers with CAGR of 11.4% and 8.6% respectively. Jaguar Land Rover's (JLR) luxury
vehicle market share (~4% or 0.23m units), comprising 1.3% in luxury cars and 9.9%
in luxury SUVs, is small compared with the top three players. JLR's weakness in cars
offers headroom for growth, driven by planned launches over 2-3 years. JLR's entry in
the lower luxury segment will give it access to higher volume segments, where it has
no presence.
Land Rover commands strength; Evoque to drive growth, market share
In the global premium SUV segment, Land Rover's volumes are comparable with those
of BMW (excluding X1), Mercedes Benz and Audi. Within Land Rover brand, Range
Rover portfolio enjoys a relatively more premium image. The luxury SUV segment
registered 11.6% CAGR over CY00-10 and we expect it to post 9.7% CAGR over
CY10-15. JLR's launch of Evoque in the high volume potential compact luxury SUV
segment will be a key growth driver over 2-3 years.
Jaguar's niche offers significant headroom for growth
Land Rover competes well with the top three luxury SUV makers, but Jaguar's volumes
lag its peers. It has just three models and seems to be weak, with volumes of only
~54,000 units (1.3% market share). Jaguar's small product range and absence in the
high volume, entry-level luxury segment are major reasons for its comparatively smaller
size. We foresee strong potential for Jaguar in the entry-level luxury segment (D2), a
market of over 1.1m units a year. Jaguar can leverage its brand heritage to gain market
share in the luxury car segment. JLR's European peers sell ~1m cars in the segment
in which Jaguar is present and ~1.2m units in the compact luxury car segment, which
Jaguar plans to enter by CY14.
Evoque key to growth, can add volumes of 70,000-80,000 a year
Evoque is positioned as the smallest, lightest and most fuel efficient Range Rover. Range
Rover intends to leverage its brand heritage to enter a lower priced, high volume potential
luxury compact SUV segment. Evoque has garnered high interest with ~20,000 order
backlog (after ~15,000 dispatches) and the management expects volumes of 70,000-
80,000 a year. The compact SUV segment is expected to post CAGR of ~36% over 2010-
15 to 0.7m units. Evoque enjoys distinct brand positioning and is not expected to cannibalize
the existing product. Some deterioration in Land Rover's product mix is expected, the
impact of which would be offset by higher volumes.
China a big opportunity for JLR; Local presence to improve
competitiveness
In 10 years' time, China is expected to account for 22% (2.1m units) of global premium
vehicle volumes from 13% currently. China's luxury vehicle market will post 11.4% CAGR
over next 10 years. Premium pricing compared with other markets and a better product
mix will result in higher realizations and make China one of the most profitable luxury
vehicle markets. With its strong growth potential, luxury carmakers are increasing their
presence in China. Since JLR is a small player in China (4% market share) the market
offers potential to ramp-up volumes. JLR will increase its China presence by almost doubling
its dealer network to 100 by CY11 and set up a manufacturing presence (through a JV as
mandated by Chinese law) to circumvent high import duty.
Improving volumes, market mix, cost efficiencies to offset cost push
We estimate JLR's overall volumes will grow 17% YoY to ~286,000 units in FY12 and
realizations will improve by 7% in FY12 due to an improved market mix. It will expand
regional coverage in emerging economies with growing sales potential, especially in China,
its most profitable market. We expect short-term EBITDA margins to contract due to high
raw material and marketing costs. However, the benefits of higher operating leverage, cost
efficiency and a better market mix will kick-in in the medium term. We expect JLR to
generate free cash flow of GBP364m and GBP582m in FY12 and FY13, respectively,
despite annual capex of GBP1.5b.
Domestic business a key contributor with high visibility
JLR is the largest contributor to Tata Motors' (TTMT) consolidated performance, contributing
~23% to normalized EBITDA and 46% to fair value estimates. TTMT's domestic business,
in which CVs are key contributor, offers better visibility. The increasing contribution of
LCVs to CV volumes (~60% currently v/s ~49% in FY08) reduces the cyclicality of the CV
business. We expect TTMT's passenger vehicle (PV) business to underperform the domestic
PV industry and lose market share.
Valuation and view: TTMT's stock corrected ~26% over the past six months and
underperformed the Sensex by 13%. As a result, valuations at 11.5x FY12 and 9x FY13
normalized EPS for ordinary share, and 6.3x FY12 and 4.9x FY13 normalized EPS for
DVR shares is very attractive. Buy with target price of INR235 (SOTP) for the ordinary
share.
Outlook for luxury vehicles remains positive
Global luxury vehicle market is expected to clock ~9% CAGR over CY11-15
driven by rising affluence in emerging markets, especially China and BRIKT.
JLR has a much smaller market share relative to the top 3 (BMW, Mercedes
Benz and Audi), implying significant headroom for growth.
We believe JLR's new compact SUV, Evoque, and planned entry into the
executive car segment (3-Series competitor) to be key growth triggers over
the next 2-3 years.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
On the right track
Niche presence, new launches, wider market reach to be key drivers
Under Tata Motors parentage, JLR is all set to emerge as a bigger, better and
stronger global luxury vehicle player. It is taking several initiatives to fortify its
strength in luxury SUVs and improve its weak positioning in luxury car market.
Outlook for luxury vehicles remains positive, JLR can drive secular growth.
Land Rover commands strength; Evoque to drive growth, market share
gains.
Jaguar's niche presence offers significant headroom to grow.
China a big opportunity; JLR's local presence will boost competitiveness.
Improved volumes, market mix, cost efficiencies to offset cost push.
TTMT's domestic CV business has seen reduced volatility driven by higher
LCV contribution.
Outlook for luxury vehicles positive, JLR can drive secular growth
The luxury vehicle market will post CAGR of 8.9% to 9m units over 2011-15. We
expect China and BRIKT (Brazil, Russia, India, Korea and Turkey) to be key growth
drivers with CAGR of 11.4% and 8.6% respectively. Jaguar Land Rover's (JLR) luxury
vehicle market share (~4% or 0.23m units), comprising 1.3% in luxury cars and 9.9%
in luxury SUVs, is small compared with the top three players. JLR's weakness in cars
offers headroom for growth, driven by planned launches over 2-3 years. JLR's entry in
the lower luxury segment will give it access to higher volume segments, where it has
no presence.
Land Rover commands strength; Evoque to drive growth, market share
In the global premium SUV segment, Land Rover's volumes are comparable with those
of BMW (excluding X1), Mercedes Benz and Audi. Within Land Rover brand, Range
Rover portfolio enjoys a relatively more premium image. The luxury SUV segment
registered 11.6% CAGR over CY00-10 and we expect it to post 9.7% CAGR over
CY10-15. JLR's launch of Evoque in the high volume potential compact luxury SUV
segment will be a key growth driver over 2-3 years.
Jaguar's niche offers significant headroom for growth
Land Rover competes well with the top three luxury SUV makers, but Jaguar's volumes
lag its peers. It has just three models and seems to be weak, with volumes of only
~54,000 units (1.3% market share). Jaguar's small product range and absence in the
high volume, entry-level luxury segment are major reasons for its comparatively smaller
size. We foresee strong potential for Jaguar in the entry-level luxury segment (D2), a
market of over 1.1m units a year. Jaguar can leverage its brand heritage to gain market
share in the luxury car segment. JLR's European peers sell ~1m cars in the segment
in which Jaguar is present and ~1.2m units in the compact luxury car segment, which
Jaguar plans to enter by CY14.
Evoque key to growth, can add volumes of 70,000-80,000 a year
Evoque is positioned as the smallest, lightest and most fuel efficient Range Rover. Range
Rover intends to leverage its brand heritage to enter a lower priced, high volume potential
luxury compact SUV segment. Evoque has garnered high interest with ~20,000 order
backlog (after ~15,000 dispatches) and the management expects volumes of 70,000-
80,000 a year. The compact SUV segment is expected to post CAGR of ~36% over 2010-
15 to 0.7m units. Evoque enjoys distinct brand positioning and is not expected to cannibalize
the existing product. Some deterioration in Land Rover's product mix is expected, the
impact of which would be offset by higher volumes.
China a big opportunity for JLR; Local presence to improve
competitiveness
In 10 years' time, China is expected to account for 22% (2.1m units) of global premium
vehicle volumes from 13% currently. China's luxury vehicle market will post 11.4% CAGR
over next 10 years. Premium pricing compared with other markets and a better product
mix will result in higher realizations and make China one of the most profitable luxury
vehicle markets. With its strong growth potential, luxury carmakers are increasing their
presence in China. Since JLR is a small player in China (4% market share) the market
offers potential to ramp-up volumes. JLR will increase its China presence by almost doubling
its dealer network to 100 by CY11 and set up a manufacturing presence (through a JV as
mandated by Chinese law) to circumvent high import duty.
Improving volumes, market mix, cost efficiencies to offset cost push
We estimate JLR's overall volumes will grow 17% YoY to ~286,000 units in FY12 and
realizations will improve by 7% in FY12 due to an improved market mix. It will expand
regional coverage in emerging economies with growing sales potential, especially in China,
its most profitable market. We expect short-term EBITDA margins to contract due to high
raw material and marketing costs. However, the benefits of higher operating leverage, cost
efficiency and a better market mix will kick-in in the medium term. We expect JLR to
generate free cash flow of GBP364m and GBP582m in FY12 and FY13, respectively,
despite annual capex of GBP1.5b.
Domestic business a key contributor with high visibility
JLR is the largest contributor to Tata Motors' (TTMT) consolidated performance, contributing
~23% to normalized EBITDA and 46% to fair value estimates. TTMT's domestic business,
in which CVs are key contributor, offers better visibility. The increasing contribution of
LCVs to CV volumes (~60% currently v/s ~49% in FY08) reduces the cyclicality of the CV
business. We expect TTMT's passenger vehicle (PV) business to underperform the domestic
PV industry and lose market share.
Valuation and view: TTMT's stock corrected ~26% over the past six months and
underperformed the Sensex by 13%. As a result, valuations at 11.5x FY12 and 9x FY13
normalized EPS for ordinary share, and 6.3x FY12 and 4.9x FY13 normalized EPS for
DVR shares is very attractive. Buy with target price of INR235 (SOTP) for the ordinary
share.
Outlook for luxury vehicles remains positive
Global luxury vehicle market is expected to clock ~9% CAGR over CY11-15
driven by rising affluence in emerging markets, especially China and BRIKT.
JLR has a much smaller market share relative to the top 3 (BMW, Mercedes
Benz and Audi), implying significant headroom for growth.
We believe JLR's new compact SUV, Evoque, and planned entry into the
executive car segment (3-Series competitor) to be key growth triggers over
the next 2-3 years.
No comments:
Post a Comment