Sunday, November 2, 2014

>TATA MOTORS : Land Rover registers 7.8% decline, Jaguar declines by 11.2% YoY (MOTILAL OSWAL)

Land Rover registers 7.8% decline, Jaguar declines by 11.2% YoY

 JLR Sep-14 sales declined by 8.4% YoY (+3.8% MoM) to 32,858 units (est. 38,256 units), driven by decline in both Land Rover and Jaguar.
 Our interaction with management indicates healthy demand environment. Decline in sales have been primarily due to production constraints on account of transition to upcoming launches of Jaguar XE, Discovery Sport and start of China JV in 4QFY15.

 Land Rover declined by 7.8% YoY to 27,143 units (est. 31,497 units), while Jaguar declined by 11.2% YoY to 5,715 units (est. 6,760 units).

 As per the regional retail sales performance data released, China grew at the highest rate of 25.3% YoY. The UK and Europe grew by 9.3% and 21.1% YoY respectively, while the AsiaPacific grew by 24.5%. All major markets registered growth, except US and RoW which declined by 12.3% and 2.5% respectively.

 Commenting on the September performance Andy Goss, Jaguar Land Rover Group Sales Operations Director said: "Jaguar Land Rover has delivered continued solid growth in September. Our investment in new products continues with the debut of the Land Rover Discovery Sport and the Jaguar XE this month, giving us a very strong, desirable range of products appealing to more customers than ever before - and many more new models in the pipeline."

Valuation and view
 We believe JLR is on the strategic path and is investing in the right areas, resulting in its evolution as a much stronger and balanced player in the luxury vehicle market.

 Domestic business is expected to bounce back strongly along with an economic recovery and favorable product lifecycle in the PV division.

 The stock trades at 7.7x/5.7x FY15E/FY16E consolidated EPS.

 Maintain Buy with a target price of INR620 (FY16E SOTP-based) for ordinary shares and INR372 for DVR (~40% discount to the target price for ordinary shares).