Macquarie Research:: Tata Motors- Evoque arrives

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Tata Motors
Evoque arrives
Event
 Tata Motors’ subsidiary Jaguar Land Rover (JLR) reported strong wholesale
volume growth of 31% for the month of August. This strong growth was driven
by the new models (Evoque and new XF) and the emerging markets (China).
The product mix and the geographical mix too have been favourable for the
profit margins. We maintain Outperform rating with a TP of Rs250.
Impact
 JLR August sales grew 31%YoY to 21,242 vehicles. Land Rover sales
were 17,833 (+43%), while Jaguar sales were 3,409 (-10%). LR sales include
1,750 units of Evoque, for which dispatches started in Aug-end. Even without
Evoque, LR sales grew strongly by 29%. We expect the sales momentum to
pick-up from September as Evoque dispatches ramp up and new models are
launched in the other markets. YTD sales for JLR stand at 102,451 (+10%).
 New products have just started to pay-off. JLR has recently launched two
of its much anticipated models – i) Jaguar XF with 2.2L engine and ii) Range
Rover Evoque. We expect these two products to drive the growth this year.
 The new XF, with a 2.2L 4-cylinder diesel variant, is likely to double the
addressable market as this will be the first Jaguar with CO2 emissions
below 150g/km, a crucial cut-off point for fleet buyers.
 Evoque, which is the smallest and the most fuel efficient Range Rover,
will make Range Rover affordable for a larger market. The initial response
to Evoque has been very strong (>20k pre-bookings).
 JLR to launch 40 new cars over the next 5 years. JLR’s GBP1.5bn annual
capex for the next three years includes ~GBP800-900mn spending on new
product developments and joint engine development plans with Tata Motors.
JLR will be launching a smaller Jaguar (BMW 3-series and Audi A4 rival) by
2012 end, which is likely to be another big seller for the company.
 JV partner for China to be finalised before the year end. Company is at an
advanced stage of negotiation with the local companies for a JV to set up an
assembly plant in China. The plant will have a minimum localisation to the
extent of 2/3rd of the aggregates. As locally assembled cars retail at the same
price as imported, there will be significant cost savings.
Earnings and target price revision
 No change (adjusted for a 5:1 stock split).
Price catalyst
 12-month price target: Rs250.00 based on a Sum of Parts methodology.
 Catalyst: Monthly sales numbers and customer response to the new products.
Action and recommendation
 Reaffirm Outperform. We remain positive on JLR business in terms of both
volume potential and margins. TTMT is trading 5.6x FY12E PER.