JLR’s product launches in FY16 have materialised into good volumes and we expect FY17 would reap the benefits from these launches, says a Prabhudas Lilladher report. Over FY17/18, four new products have been planned by JLR, of which, the new Discovery and new Range Rover appear most interesting.
India operations would witness positives from the improved M&H CV demand and recovery from lows of LCV demand. However, we believe that the car portfolio is likely to be an underperformer. We maintain ‘buy’ with a target price of Rs 503 on JLR. Here are other important highlights from the report:
1) New launches planned by JLR: Over FY17/18, JLR has four new products planned. These include (1) the Evoque convertible in June 2016, (2) the long wheelbase XFL in China in Oct 2016, (3) a new Discovery in H2FY17 (along with a phasing out of the old model), which would be ramped]up in a phased manner globally and (4) a RR positioned between Evoque and RR Sport during FY18.
2) Performance of JLR’s FY16 launches: The F-Pace has been launched in most major markets now and has witnessed a good response. The waiting period is 5] 6 months in UK. JLR is targeting 60,000]70,000 units annual sales from the FPace. The XE was witnessing volumes of 3,000]3,500/month before its US launch. The company is targeting 45,000]60,000 annual sales from the XE. The Discovery Sport has now been launched in all markets and is doing a run]rate of ~9,000 units/month.
3) China prospects: The XFL will be the third product manufactured by this JV. This would be followed by the engine localisation program. JLR has 200 dealers in China at present, which would be increased to 250 in 12 months. Chery JLR JV’s Q4FY16 performance should not be viewed in isolation as Q3FY16 captured new product launch costs; H2FY16 gives a more sustainable picture.
4) JLR’s E-vehicles: JLR is still 3]4 years away from an e]vehicle solution as size and weight of the battery are constraining factors. E]vehicles would be preceded by hybrids.
5) Possibility of Brexit: This event could be negative for JLR in the short term as it would raise issues of a fiscal deficit, lower UK growth and adequate manpower shortfall. However, there would be multiple indeterminable variables which can vary the level of impact on JLR.
6) India M&HCVs: Momentum is likely to continue as this cycle appears to have more legs than previous cycles. While sales in FY16 were driven by replacement sales, FY17 would see fleet addition and replacement, pre]buying prior to pan] India BSIV implementation and benefits infra spending by the public sector.
7) India LCVs: Though currently benefiting from the lower base, lower financier support is hampering the LCV growth rate. On a medium]to]long term basis, the LCV growth should be better than M&HCVs.
8) India Passenger Cars: TTMTfs focus is on improving acceptance by buyers as their cars do not figure on most potential car customers top 3 lists of test drive vehicles.
9) India UVs: New launches here would include the Hexa in 3]4 months (replacing the Aria) and Nexon in 12]18 months (in the Duster/Ertiga/Mobilio segment).
Report by Prabhudas Lilladher