Stock corner: Maintain ‘Buy’ on Tata Motors and fair valur of Rs 200

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Published: December 11, 2019 3:36:02 AM

JLR gained 20 bps market share y-o-y in the US luxury car market segment at 6.5% y-o-y in 9MCY19 led by strong demand for Discovery, Range Rover Sport and Evoque. JLR has improved its market share from 7.8% in CY2018 to 8.2% in CYTD19 (data till October 2019) in Europe.

Stock corner, Buy, Tata Motors, Tata Motors share, Tata Motors share priceJLR’s retail volumes declined 3% y-o-y to 46,542 units in November 2019. Jaguar volumes declined by 23% y-o-y while Land Rover volumes increased by 6% y-o-y led by the success of RR Evoque.

Cost reduction targets on track for JLR. JLR management is on track to achieve its cost reduction targets ahead of its initial deadline and will likely achieve further cost reductions in FY2021, which will likely turn JLR FCF positive. Recovery in volumes in China for JLR is encouraging and is likely to sustain as dealer inventory levels are low. Maintain ‘Buy’ rating and fair value of  Rs 200.

JLR’s retail volumes declined 3% y-o-y to 46,542 units in November 2019. Jaguar volumes declined by 23% y-o-y while Land Rover volumes increased by 6% y-o-y led by the success of RR Evoque. China volumes increased by 29% y-o-y and North America volumes increased by 5% y-o-y in November 2019. However, sales in the UK were down by 11% y-o-y due to weak economic conditions and lower incentives, and sales in EU region were down by 17% due to a higher base in November 2019. Rest of the world sales declined by 17% y-o-y led by weakness in Russia and MENA regions in November 2019.

Land Rover volumes increased by 6% y-o-y 2019 led by 25% y-o-y increase in volumes of RR Evoque and 16% y-o-y increase in volumes of Discovery model in November 2019. However, Jaguar volumes continue to disappoint with 23% y-o-y decline led by 20-58% y-o-y decline in volumes for E-Pace, I-Pace, XE, XF and XJ models.

JLR gained 20 bps market share y-o-y in the US luxury car market segment at 6.5% y-o-y in 9MCY19 led by strong demand for Discovery, Range Rover Sport and Evoque. JLR has improved its market share from 7.8% in CY2018 to 8.2% in CYTD19 (data till October 2019) in Europe.

However, JLR lost 120 bps market share y-o-y in China from 4.7% in CYTD18 to 3.5% in CYTD19 (data till October 2019) mainly led by inventory correction in H1CY19. However, over the last four months, JLR has outperformed its peers (BMW, Audi, and Mercedes) by growing at a pace of ~22% versus 3-13% of its peers.

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