Tata Motors’ jlr achieves fewer retail sales than its peers, but this brokerage thinks it can make up for it

By CNBCTV18.com IST (Released)


Tata Motors: Compared to retail sales of peers, which were up around 3.5% from the April-June quarter, retail sales of Tata Motors’ UK subsidiary Jaguar Land Rover (JLR) , were down 6% in the quarter under review.

Jaguar Land Rover (JLR), the UK subsidiary of Tata Motors, had 6% fewer retail sales in the April-June quarter, at a time when peers like Audi, BMW and Mercedes Benz were selling about 3 .5% more.

The main reason for the decline was the company’s limited production of the higher-margin Range Rover Sport model of just 6,000 units from its typical run rate of around 25,000 units, according to the company. ICICI Securities brokerage.

“Compared to its peers, JLR’s June quarter retail sales were relatively more affected as it suffered the burnout phase of RR/RR Sport, resulting in lost volumes,” the brokerage said. adding that it went beyond the impact of China’s lockdown. .

The brokerage said JLR is expected to gather around 80,000 units per quarter in the remainder of FY23 to maintain stable year-over-year wholesale volumes, excluding China.

With an outlook suggesting around 90,000 units in the second quarter, ICICI Securities believes that JLR is on track to make up for its underperformance in the June quarter.

JLR and the performance of its peers in the June quarter
Company Revenue Margin
Audi Up to 3% per year EBITDA margin decreased by 190 basis points year-on-year to 9.4%, and EBIT margin decreased by 178 basis points year-on-year to 8.9%
BMW Up to 20% year over year EBIT margin fell 380 bps YoY to 12.0%, while EBT margin decreased 1,060 bps YoY to 8.4%
JLR Down 11% year-on-year EBITDA margin contracted 271 basis points year-on-year to 6.3%
Mercedes Benz Up to 8% year over year EBIT margin increased by 195 basis points year-on-year to 14%
Source: ICICI Securities brokerage report

The brokerage firm estimates that wholesale sales of around 30,000 units per month in the coming months would be enough for JLR to meet its FY23 free cash flow guidance of £1 billion. This would mean free cash flow equilibrium volumes of around 25,000 units per month.

Margin outlook

JLR’s profit margin before interest taxes (EBIT) of 5% currently looks higher for FY23, and to achieve this, the brokerage firm believes the luxury automaker needs to generate earnings before depreciation and amortization ( EBITDA) by 15 percent for the remaining quarters of FY23.

“With operating margin guidance for global peers slightly moderate year-over-year due to input cost inflation, we expect JLR to have an EBIT margin of 1.5% (up from 150 bps YoY) vs. 5% guidance (FY23E EBITDA margin at 10.5% vs Q1 at 6.3%),” the brokerage said.

ICICI Securities maintained its ‘buy’ rating on Tata Motors shares with an unchanged target price of Rs 646, implying a percentage rise in the stock.

Investment and R&D expenses

With a focus on electric vehicles (EVs) and product development, the outlook for capital spending and research and development spending remains largely unchanged year-over-year for most peers as well as for JLR.

The British luxury carmaker has planned an investment of around £2.5 billion for FY23, similar to FY22.

Sallie R. Loera