Tata Motor’s (TTMT) management attended Nomura’s India Corporate Day, Singapore, on 15 March 2016. Management highlighted that the benefits of the new model cycle in Jaguar Land Rover (JLR) are now starting to unfold. Retail volume growth has been 25% in the last 5 months, with an improving growth trajectory across markets. The company expects volumes to stay strong in the near term, with a strong model cycle and new gasoline engines for the US and Chinese markets. The company maintained guidance of 14-16% EBITDA margins for JLR.
For the Chinese market, management stated that the worst is over. It now expects strong performance from the Chinese market, driven by its China JV. Volumes for the JV will benefit from 19% lower pricing due lower taxes, and margins will benefit from higher utilisation, a lower cost base and localisation, according to management.
For the India business, management mentioned that further turnaround is visible in trucks, with improvement in LCV demand and MHCV tipper demand (for the mining segment). With new PV models planned in 2016, the company is hopeful of a recovery in its India business in FY17F. Overall, we believe that management’s outlook will be viewed positively by investors. Maintain Buy.
Globally, management expects the premium car industry to see a 6-7% CAGR in the medium term. JLR’s products launch pipeline remains strong – Jaguar XE in the US (2QCY16); F-Pace (2QCY16); New Discovery (LR 4 in the US) in end-CY16; mid-size RR, RR/RR-Sport/Jaguar XJ refresh in 2017; Defender in 2018.