Tata Motors’ JLR segment lags peers; volumes set to improve
PremiumAs operating conditions improve and demand firms up, JLR’s volume guidance of 90,000 units in the September quarter is doable, said analysts
Tata Motors Ltd’s UK-based subsidiary, Jaguar Land Rover Automation PLC is lagging its peers Audi, BMW, and Mercedes Benz. Supply chain issues, slower-than-expected ramp-up of the new Range Rover and Range Rover Sport, lockdowns in China are weighing on sales volumes.
In the June quarter, retail volumes in the Jaguar and Land Rover (JLR) segment were flat sequentially at 67,824 units (excluding joint venture with China). Retail volumes in the peer set were higher by about 3-5%, according to analysts at ICICI Securities.
However, as operating conditions improve and demand firms up, JLR’s volume guidance of 90,000 units in the September quarter is doable, said analysts.
“As per guidance provided post H1CY22 results by peers of JLR, volumes in global luxury car segment are set to remain flattish in CY22," said analysts at ICICI Securities in a report on 24 August.
On the other hand, JLR’s Ebit (earnings before interest and tax) margin guidance of 5% for FY23 appears to be very optimistic. In FY22, JLR reported an Ebit loss. Analysts at ICICI Securities are building-in Ebit margin of about 1.5% for JLR as the guidance for this measure for global peers is slightly subdued owing to input cost inflation.
Also, there is no scope for cut-back in research and development (R&D) expenses given the increasing momentum for electric vehicles. JLR and its peers have guided R&D expenses in the current year to be similar to the levels seen last year.
JLR expects to clock free cash flow of more than GBP 1 billion in FY23. Wholesale volumes of about 30,000 units per month in the upcoming months would be good enough for JLR to meet this guidance, according to ICICI Securities analysts.
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Shares of Tata Motors are down by 13.6% from their 52-week high seen in November. A significant improvement in the performance of the JLR segment would boost investor sentiment.
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