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Monthly sales update on Tata Motors - Jaguar Land Rover with an Accumulate recommendation and a Target Price of `319 (12 months).
Jaguar and Land Rover (JLR) recorded a strong wholesale volume growth of 18.7% yoy (24.2% mom) to 34,649 units for the month of November 2012, which was ahead of our estimate of 28,500 units, led by robust growth across Jaguar and Land Rover.
Jaguar sales posted a strong growth of 17.8% yoy (87.5% mom) driven by dispatches of the model year 2013 models. During the month, JLR began dispatching the all-wheel-drive XF and XJ models (mainly to US) and smaller engine versions of XF and XJ (majorly to China).
Land Rover sales too registered a robust growth of 18.9% yoy (15.6% mom) backed by strong growth in the sale of Evoqueand Freelander models. The sales benefitted from the start of the third shift at the Halewood plant which eased the production constraints for Evoque (~11,000 units vs. ~9,500 units in October 2012) and Freelander (~5,000 units) models.
Outlook and valuation: We retain our positive view on JLR and expect a 12% volume CAGR over FY2012-14E driven byEvoque and new product launches (Range Rover, Range Rover Sport, Jaguar XF Sportbrake and all-wheel drive and smaller engine options in the XF and XJ models). Further, a favorable market and product-mix and stable commodity prices will help mitigate raw-material cost pressures. We recommend an Accumulate rating on Tata Motors with a sum-of-the-parts (SOTP) target price of `319.
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