Tata Motors’ Q4FY23 strong wholesale volumes reached 94.6k units, representing a robust 24% y-o-y and 19% q-o-q growth, surpassing market expectations of 84.5k units. The FY23 wholesales increased by 9% y-o-y to 321.3k units. The Land Rover brand showed impressive performance, with sales of 84.9k units, up by 34% y-o-y and 22% q-o-q, while Jaguar volumes decreased by 27% y-o-y and 3% q-o-q, reaching 9.7k units. These figures exclude sales from the China JV. The Range Rover and Range Rover Sport models continued to demonstrate growth, with Q4FY23 wholesale volumes reaching 32,950 units, up from 28k units in Q3. Defender volumes increased to 27,513 units in Q4FY23 due to JLR’s third shift operations at the Nitra plant, compared to 23,816 units in Q3.
Retail volumes grew 30% y-o-/21% q-o-q: Q4 retails grew 30% y-o-y (+21% q-o-q) to 102.9k units, and declined 6% in FY23 to 354.7k units. Retails were higher in all the markets, with strong growth in EU (+46% y-o-y), UK (+42% y-o-y), RoW (+30%), China (+29%) and US (+12%). The order book declined by 15k units q-o-q to 200k units, as wholesales improved by 15k q-o-q. RR/RR Sport/Defender contributed 76% to the order book .
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The company’s free cash flow (FCF) is expected to be over £800m positive in Q4 and over £500m positive for FY23. During the Q3FY23 earnings call, the management had forecasted that the Q4 FCF would be slightly lower than the £490m generated in Q3. These projections suggest that the company’s net debt would be around £3bn by March 2023, compared to £3.85bn as of December 2022.
Based on JLR’s beat on Q4 wholesale volumes, our Q4FY23 revenue/Ebitda/PAT estimates for JLR now stand at £7.2bn/£1.1bn/ £265m (v/s £6.6b/£0.85b/£179m earlier). Our Q4FY23 estimates for consolidated revenue/Ebitda/PAT now stand at Rs 1,031bn /Rs 136.6bn/Rs 34.4bn.
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All three businesses of Tata Motors are in a recovery mode. While the India CV business will see a cyclical recovery, the India PV business is seeing a structural recovery. JLR is also witnessing a cyclical recovery, supported by a favourable product mix. However, supply-side issues will delay the recovery process. While there will be no near-term catalysts from the JLR business, the recovery in the India business will continue.