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JLR Management plans to ramp-up Evoque, which has better margins than its largest selling
Freelander. This should help management to meet its guidance of flat margins for FY12F. With
new XF smaller diesel engine option expanding its addressable market by 3x, it hopes to plug
decline seen in Jaguar volume. Buy.
Revenue growth was driven by China in FY11
JLR revealed its IFRS based annual report for its bondholders. It is to be noted that following
analysis is based on theses numbers which are different from Indian GAAP compliant
numbers which company provides every quarter for consolidation purpose.
China led the pack with 159% yoy revenue growth in FY11 followed by rest of world (59%)
and US (58%) as the volumes growth surged in these geographies.
The realization per vehicle was highest in China at £61,035/vehicle during FY11 up 80% yoy.
The Rest of World realization also went up by 20% to £57,312/vehicle. Realization in UK,
Europe and US was in the range of £31,000-38,000/vehicle. Management clarified that the
high realization was due to 1) a better product mix 2) higher import duty in the country added
in the sales price and 3) better margins.
The management also clarified during the call that higher discounts (in China or elsewhere)
could be dealer specific schemes and would not impact the top-line of the company.
Management clarified that in FY11, the decline in XF volume was mainly due to 1) cessation
of production of old model of XF and 2) weaker economic conditions.
Operating efficiency and financial restructuring resulted in better leverage ratio
During the year raw material cost as a percentage of sales declined from 67.7% in FY10 to
62.4% in FY12. Works, operations and other costs also declined from 8.8% of net sales in
FY10 to 7.9% in FY11. The cost reduction was due to better operational efficiency.
Post its restructuring of preference shares, the net debt as at the end FY11 was £354mn
(FY10 £2.35bn) and net debt to equity was 0.24. The EBITDA/ interest was 20.24.
During FY11, the company generated free cash flow to the tune of £876mn. The cash flow
from operation before working capital change was £1.52bn (on EBITDA of £1.50bn) and cash
flow from operations after working capital change was £1.65bn.
As at the end FY11, the company had cash in hand at £1.03bn, un-drawn committed credit
lines at £356mn and un-drawn uncommitted credit lines at £411mn, taking its total liquidity in
hand to £1.80bn.
Forex gain during FY11 was £33mn due to a weaker GBP against the USD.
Outlook- Evoque to drive volume growth
New product/ refreshed model line up for Jaguar is: new XF (2.2ltr Diesel), Refurbished XK
and XKR- S- special addition; new XJ with rear seat enhancements
New product/ refreshed model line up for Land Rover is: Evoque and new refreshed models
of Range Rover, Range Rover sport, Freelander and Discovery
Land Rover plan- Evoque : Management expects contribution per vehicle from Evoque to be
better than Freelander but below Range Rover sport. We believe that 18,000 advance
bookings is enthusiastic response considering that none of the buyer has even taken a test
drive. The company has hired 2,000 temporary workers to ramp-up Evoque production at its
facility.
The retail Evoque launch is expected in September so wholesale sales is expected to start by
August. Management expects production lines for Evoque to be stabilize by October end.
Management also said that it doesn't expect Evoque to cannibalize its existing portfolio as it is
aimed to a different segment of customers.
Jaguar plan : The new XF model with 2.2ltr diesel engine versus 3.0 ltr currently is expected
in September in UK market. Management expects this model to expand its addressable
market by 3 times and improve sales volume.
The planned capex for FY12 is £1.5bn as against £869mn in FY11. Out of this £1.5bn, slightly
above 50% is expected to be research and development costs (out of this about 80-90% will
be capitalized) and the rest is expected to be spend on tangible assets.
The management in its annual report has noted that it is planning to increase its product
development and engineering team base to 5,000 from current 4,500 in order to support its
product development program.
Management said that it is planning to double its dealer base in China to 100 by end FY12
from current slightly above 50 dealers.
Management expects employee expenses to increase by about 5% in line with retail price
inflation.
Management expects economic conditions in UK and rest of the Europe (excluding Russia) to
remain weak in FY12 (1QFY12 Jaguar retail sales was down 10% yoy) thereby impacting
demand of premium cars but said that it remained hopeful that strong sales volumes in other
markets (particularly emerging) would more than make up for it.
The management provided no clarity on either the in-house engine making plan (currently the
engines are sourced from Ford) or on its China vehicle assembly start-up during the call.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JLR Management plans to ramp-up Evoque, which has better margins than its largest selling
Freelander. This should help management to meet its guidance of flat margins for FY12F. With
new XF smaller diesel engine option expanding its addressable market by 3x, it hopes to plug
decline seen in Jaguar volume. Buy.
Revenue growth was driven by China in FY11
JLR revealed its IFRS based annual report for its bondholders. It is to be noted that following
analysis is based on theses numbers which are different from Indian GAAP compliant
numbers which company provides every quarter for consolidation purpose.
China led the pack with 159% yoy revenue growth in FY11 followed by rest of world (59%)
and US (58%) as the volumes growth surged in these geographies.
The realization per vehicle was highest in China at £61,035/vehicle during FY11 up 80% yoy.
The Rest of World realization also went up by 20% to £57,312/vehicle. Realization in UK,
Europe and US was in the range of £31,000-38,000/vehicle. Management clarified that the
high realization was due to 1) a better product mix 2) higher import duty in the country added
in the sales price and 3) better margins.
The management also clarified during the call that higher discounts (in China or elsewhere)
could be dealer specific schemes and would not impact the top-line of the company.
Management clarified that in FY11, the decline in XF volume was mainly due to 1) cessation
of production of old model of XF and 2) weaker economic conditions.
Operating efficiency and financial restructuring resulted in better leverage ratio
During the year raw material cost as a percentage of sales declined from 67.7% in FY10 to
62.4% in FY12. Works, operations and other costs also declined from 8.8% of net sales in
FY10 to 7.9% in FY11. The cost reduction was due to better operational efficiency.
Post its restructuring of preference shares, the net debt as at the end FY11 was £354mn
(FY10 £2.35bn) and net debt to equity was 0.24. The EBITDA/ interest was 20.24.
During FY11, the company generated free cash flow to the tune of £876mn. The cash flow
from operation before working capital change was £1.52bn (on EBITDA of £1.50bn) and cash
flow from operations after working capital change was £1.65bn.
As at the end FY11, the company had cash in hand at £1.03bn, un-drawn committed credit
lines at £356mn and un-drawn uncommitted credit lines at £411mn, taking its total liquidity in
hand to £1.80bn.
Forex gain during FY11 was £33mn due to a weaker GBP against the USD.
Outlook- Evoque to drive volume growth
New product/ refreshed model line up for Jaguar is: new XF (2.2ltr Diesel), Refurbished XK
and XKR- S- special addition; new XJ with rear seat enhancements
New product/ refreshed model line up for Land Rover is: Evoque and new refreshed models
of Range Rover, Range Rover sport, Freelander and Discovery
Land Rover plan- Evoque : Management expects contribution per vehicle from Evoque to be
better than Freelander but below Range Rover sport. We believe that 18,000 advance
bookings is enthusiastic response considering that none of the buyer has even taken a test
drive. The company has hired 2,000 temporary workers to ramp-up Evoque production at its
facility.
The retail Evoque launch is expected in September so wholesale sales is expected to start by
August. Management expects production lines for Evoque to be stabilize by October end.
Management also said that it doesn't expect Evoque to cannibalize its existing portfolio as it is
aimed to a different segment of customers.
Jaguar plan : The new XF model with 2.2ltr diesel engine versus 3.0 ltr currently is expected
in September in UK market. Management expects this model to expand its addressable
market by 3 times and improve sales volume.
The planned capex for FY12 is £1.5bn as against £869mn in FY11. Out of this £1.5bn, slightly
above 50% is expected to be research and development costs (out of this about 80-90% will
be capitalized) and the rest is expected to be spend on tangible assets.
The management in its annual report has noted that it is planning to increase its product
development and engineering team base to 5,000 from current 4,500 in order to support its
product development program.
Management said that it is planning to double its dealer base in China to 100 by end FY12
from current slightly above 50 dealers.
Management expects employee expenses to increase by about 5% in line with retail price
inflation.
Management expects economic conditions in UK and rest of the Europe (excluding Russia) to
remain weak in FY12 (1QFY12 Jaguar retail sales was down 10% yoy) thereby impacting
demand of premium cars but said that it remained hopeful that strong sales volumes in other
markets (particularly emerging) would more than make up for it.
The management provided no clarity on either the in-house engine making plan (currently the
engines are sourced from Ford) or on its China vehicle assembly start-up during the call.
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