Tata Motors Rating: Neutral; Miss for Jaguar Land Rover in August volumes

JLR’s wholesale volumes declined 7.1% y-o-y (-5.2% m-o-m) to 39.6k units (our estimate: ~43k) in Aug’19, whereas China JV volumes were down 14% y-o-y to 4.7k units.

– Jaguar volumes declined ~29% y-o-y to ~10k units (our estimate: 12.7k), whereas JLR volumes grew ~3.8% y-o-y to 29.5k units (our estimate: 30k units).

– JLR’s retail volumes declined ~7% y-o-y with de-growth across markets (marginal in Europe). However, China sales grew ~17% y-o-y to 8.8k units.

– Jaguar’s retail volumes declined ~18% y-o-y, led by lower sales in models like XF, XK/E-pace and Others/F-types. XJ and I-Pace sales were higher at 291 and 903 units, respectively, in the month.

– JLR’s retail volumes declined marginally by 1.4% y-o-y owing to lower sales growth for Discovery, Freelander, RR and RR Velar. RR Evoque sales were up ~51% y-o-y to 5.4k units.

– Felix Brautigam, JLR Chief Commercial Officer said, “While the global market remains challenging, we have seen a second month of consecutive growth in China. For Jaguar, customer demand for the World Car of the Year-winning I-PACE continues to go from strength to strength, cementing the vehicle’s position as one of the world’s leading premium electric SUVs. For Land Rover, the all-new Range Rover Evoque is now on sale. The comprehensively re-engineered Land Rover Discovery Sport will be launched in China later this year further solidifying its position as a best-selling model. We are confident that we have the right strategy in place to support long-term sustainable growth and are looking forward to revealing the new Land Rover Defender at the Frankfurt Motor Show”.

– A sustainable recovery in volumes in JLR, particularly in China, along with the ongoing cost-cutting initiatives, is key to value-accretive growth and stock performance. This is particularly important due to the impending downcycle in the cash-cow India CV business in FY21.

– The stock trades at 13.3x/8.8x FY20/21e consol. EPS. Maintain Neutral with a TP of Rs 146 (Mar’21e SOTP-based).

Tata Motors