Jaguar Land Rover’s (JLR) June 2016 retail sales were up 17% y-o-y at 46,456 units. This is 2% ahead of our expectation of 45.7k units. Jaguar sustained strong traction with 84.1% y-o-y growth at 13,171 units. Land Rover volumes were up 2.6% y-o-y at 33,285 units. We believe there could be some upside to our wholesale forecast of 40.5k units (up 16% y-o-y) in June-16.
Geography-wise, North America supported volumes with strong 44% y-o-y growth while China up 19% was in line. The UK and Europe volumes disappointed with 14% and 8% growth, respectively.
Sales from the China JV declined 20% mom to 4ooo units. Model-wise, in Jaguar, F-Pace continues to ramp up well (5000 units vs 3000 in May 2016) while XE was up 71%. In Land Rover, Discovery Sport sustained strong momentum with 65% y-o-y, while Discovery/RR Sport was up 15%/5% y-o-y. Other models like RR/Evoque declined -16%/-12%.
Overall, we expect volume trajectory to remain healthy, led by a ramp-up of the F-Pace, the New Discovery and the Evoque convertible models in FY17. We factor in 619000 units wholesale sales in FY17, up 14% y-o-y.
We value TTMT on a sum-of-the-parts methodology to arrive at our unchanged TP of Rs 527. We expect volume growth to gradually recover in China over the next year. Further, given our view that China is the most profitable market for JLR, any disappointment from China due to regulatory concerns, demand slowdown, etc, could lead to downside risks to our earnings estimates.