Jaguar Land Rover’s (JLR) wholesale volumes, excluding the China joint venture, witnessed a robust growth of 29% y-o-y and a solid 4% q-o-q increase, reaching 96.8k units, surpassing the estimated 92.5k units. The first half of fiscal year 2024 (1HFY24) showed impressive wholesale growth of 29% y-o-y, with a total of 190.1k units. The release did not provide a detailed breakdown of wholesale figures between Jaguar and Land Rover. However, the fact that wholesales exceeded expectations, even with an annual two-week summer shutdown, suggests that supply-side constraints are gradually diminishing.
Retail volumes (incl. China JV) up 21% y-o-y/35% q-o-q
In the second quarter of the fiscal year, retail sales showed remarkable growth, surging by 21% y-o-y and an impressive 35% q-o-q increase to reach 106.6k units. For the first half of fiscal year 2024 (1HFY24), retail sales increased by 25%, totaling 208.5k units.
Retails experienced growth across all markets, with particularly strong performances in the rest of the world (+56% y-o-y), North America (+32% y-o-y), China (+7% y-o-y), the UK (+9% y-o-y), and the European Union (+16% y-o-y).
However, the order book decreased by 17k units in Q2FY24 compared to the Q1 order book of 185k units, totaling 168k units. This decline was attributed to increased order fulfillment. Range Rover, Range Rover Sport, and Defender accounted for 77% of the order book.
Others
The second-quarter free cash flow (FCF) is reported to exceed £300 million. During the 1Q earnings call, the management had initially guided for 2Q FCF to be slightly lower than the 1Q figure of £451 million.
Given the better-than-expected 2Q wholesale volumes for JLR, we have revised our 2QFY24 revenue, Ebitda, and PAT estimates for JLR to £7.2 billion, £1.1 billion, and £287 million, respectively (previously estimated at £6.9 billion, £1 billion, and £236 million). Additionally, we have raised our 2QFY24 estimates for consolidated revenue, Ebitda, and PAT to Rs 1,077.5 billion, Rs 137.1 billion, and Rs 33.4 billion, respectively.
Valuation and view
Tata Motors’ three business segments are currently undergoing various stages of recovery. The commercial vehicle (CV) business in India is poised for a cyclical rebound, while the passenger vehicle (PV) business in India is undergoing a structural recovery. Jaguar Land Rover (JLR) is also experiencing a cyclical recovery, thanks to a favourable product mix. Nevertheless, supply-side challenges could potentially slow down this recovery process. Although there are no immediate catalysts expected from the JLR business, the India business, which constitutes approximately 50% of the sum of the parts (SoTP), is expected to continue its recovery trajectory.
As of now, the stock is trading at 15x/14.4x FY24E/FY25E consolidated EPS and 4.6x/4.1x FY24E/FY25E consolidated EV/Ebitda. Our ‘Buy’ rating on the stock remains unchanged, and we have set a target price of Rs 740 based on the Sep’25 SOTP valuation.