JLR retail volumes declined by 2% y-o-y in November 2014 led by production issues due to transition to new models and start of production in China JV. Land Rover volumes declined by 2% y-o-y and Jaguar volumes declined by 4% yoy. Range Rover Sport, Evoque and Freelander volumes declined by 9%, 4% and 14% y-o-y, which have been impacted by production issues. We believe JLR volumes will recover in Q4FY15 as production issues are sorted out. We maintain ‘buy’ rating on the stock with an unchanged target price of R680.
JLR has started production of Discovery Sport in Halewood plant where they manufacture Evoque and Freelander. The company reported a 14% and 4% y-o-y decline in Freelander and Evoque volumes in Nov 2014 as production scheduling issues due to launch of Discovery Sport led to shortage of vehicles. The company is also clearing dealer inventory in China for Evoque model in China before the China JV production starts in Q4FY15.
Jaguar volumes have been weak due to poor brand perception. Jaguar XE launch in FY2016 will be critical to improve Jaguar’s brand perception. Product mix is also likely to decline on a q-o-q basis in Q3FY14 due to lower mix of Range Rover and Range Rover Sports in the mix.
We are unperturbed by last two months sales disappointments as we believe JLR volume growth will come back strongly post production issues are sorted out.
By Kotak Institutional Equities