AMBIT INSIGHTS

Tata Motors
JLR November retail volumes: Recovery gains momentum
The November 2015 retail volumes for Jaguar Land Rover (JLR) continued to
improve (up 27% YoY vs 24% in October 2015), owing to strong sales of the
newly-launched Discovery Sport and Jaguar XE (which together accounted for
29% of overall volumes). The November 2015 retail volumes were marginally
ahead of our expectation. With a strong pipeline of launches, we expect JLRs
volumes in China to recover in 2HFY16 (up 5% YoY in 2HFY16 vs down 36% in
1HFY16). Also, the demand in other key geographies (USA, Europe and UK)
remain robust (up 28-29% in Apr-Nov 2015). We expect JLR to clock 7%
growth in FY16E and a strong 14% YoY growth in FY17E (CAGR of 15% in
FY15-17E). The stock is currently trading at 12.6x FY17E adjusted net
earnings. We retain our BUY stance on Tata Motors.
Event: Retail sales of Jaguar Land Rover (JLR) in November 2015 increased by 27%
YoY to 46,547 units. This growth has been higher than the 24% YoY growth in
October 2015. Whilst the sales of the Land Rover models in November 2015
increased 26% YoY, the sales of the Jaguar models increased by a much higher 33%
YoY. Land Rovers sales growth was mainly driven by 15% YoY growth in Range Rover
and strong response to Discovery Sport. On the other hand, Jaguars volume growth
of 33% YoY was mainly driven by strong sales of the recently-launched Jaguar XE.
Whilst Range Rover Evoque volumes remained flat YoY, with 10,420 units and with a
22% share in overall volumes, it was the volume leader. Geographically, sales from
UK and Europe were up 70% and 68%, respectively. North America, too reported
strong sales growth of 52% YoY. China volumes declined 22% YoY vs 28% YoY
decline in Apr-Oct15. RoW markets reported 8% YoY growth in November 2015 (vs
5% decline in October 2015).
Exhibit 1: Region-wise retail sales (JLR) USA, Europe and UK reported strong YoY
growth in November 2015 (units in numbers)
Region

Nov-15

Nov-14

YoY

Oct-15

Oct-14

YoY

Sep-15

Sep-14

YoY

8,373

10,683

-22%

8,103

7,463

9%

7,788

11,130

-30%

11,980

7,112

68%

8,628

6,952

24%

8,660

6,304

37%

North America

8,448

5,553

52%

9,007

5,167

74%

7,693

4,831

59%

UK

9,375

5,501

70%

7,982

5,717

40%

16,198

15,299

6%

RoW

8,371

7,772

8%

7,833

8,213

-5%

7,295

8,735

-16%

46,547

36,621

27%

41,553

33,512

24%

47,634

46,299

3%

China
Europe

Total

BUY
Quick Insight
Analysis
Meeting Note
News Impact

Stock Information
Bloomberg Code:

TTMT IN

CMP (Rs):

399

TP (Rs):

452

Mcap (Rsbn/US$ bn):

1,295/19.4

3M ADV (Rsmn/US$mn):

4,080/61.2

Stock Performance (%)

1M

3M 12M YTD

Absolute

24

(23)

(19)

Rel. to Sensex

21

(13)

(11)

Source: Bloomberg, Ambit Capital research

Ambit Estimates (Rs bn)

Revenues

FY16

FY17

FY18

2,728

3,160

3,525

EBITDA

363

428

460

EPS (Rs)

39.6

49.0

50.0

Source: Bloomberg, Ambit Capital research.

Source: Company, Ambit Capital research

Exhibit 2: Model-wise retail sales (JLR) Discovery Sport and XE Jaguar were the key
reasons for strong YoY improvement in November 2015 (units in numbers)
Car model

Nov-15

Nov-14

YoY

Oct-15

Oct-14

YoY

Sep-15

Sep-14

YoY

7,992
3,953

6,010
-

33%
NM

7,467
3,515

5,363
-

39%
NM

10,394
4,762

8,504
-

22%
NM

XF
XJ
XK
F-Type
Land Rover

2,184
1,005
850
38,555

3,677
1,281
157
895
30,611

-41%
-22%
-100%
-5%
26%

2,194
876
11
871
34,086

3,135
1,167
205
856
28,149

-30%
-25%
-95%
2%
21%

3,561
1,068
18
985
37,240

5,300
1,627
337
1,240
37,795

-33%
-34%
-95%
-21%
-1%

Defender
Discovery Sport
Discovery
Freelander
Range Rover
Evoque
RR Sport

1,983
9,358
4,404
7
5,332
10,420
7,051

1,567
34
4,133
3,534
4,648
10,477
6,218

27%
NM
7%
-100%
15%
-1%
13%

2,015
7,182
4,369
8
5,382
7,671
7,459

1,695
24
3,095
4,187
4,433
9,389
5,326

19%
NM
41%
-100%
21%
-18%
40%

2,495
8,566
4,503
7
5,376
7,710
8,583

2,043
4,610
6,590
5,063
11,743
7,746

22%
NM
-2%
-100%
6%
-34%
11%

Total

46,547

36,621

27%

41,553

33,512

24%

47,634

46,299

3%

Jaguar
XE

Source: Company, Ambit Capital research

Ambit Capital Pvt Ltd

Analysts
Ashvin Shetty, CFA
ashvinshetty@ambitcapital.com
Tel: +91 22 3043 3285
Ritu Modi
ritumodi@ambitcapital.com
Tel: +91 22 3043 3292

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8 December 2015

AMBIT INSIGHTS
Where do we go from here?
JLRs November 2015 retail sales were marginally higher than our expectations. JLRs
volumes in China declined 22% YoY due to the high base of November 2014 and
slowdown in the economy. Overall, we continue to build in a better volume trend (up
5% YoY) for JLRs China volumes in 2HFY16 (as compared to a 36% YoY decline in
1HFY16) on the back of a strong pipeline of new launches.
We expect JLRs volume trends to improve in 2HFY16 in China on the back of the
following factors:
(a) Jaguar XE to significantly increase JLRs addressable market: The launch of
Jaguar XE can help JLR increase its addressable market by a sizeable 20-25% in
the luxury car segment. Jaguar XE has been, so far, launched in the UK and
Western Europe, where it has received positive reviews and customer response.
Jaguar XE has been recently introduced (imported) in China in October 2015. Its
peers, BMW 3-Series and Audi A4, are one of the best-selling models in China (3Series accounts for nearly 24% of BMW total sales in China). We expect Jaguar XE
to play an important role in JLRs incremental growth in FY17.
(b) Discovery Sport launch to fill the void of Freelander: The local production of
Discovery Sport has started recently in local JV with Chery (CJLR). We expect the
launch of the local Discovery Sport in 2HFY16 to help restore the original
Freelander volumes of 2,000 units/month.
(c) Other launches: Besides Jaguar XE and Discovery Sport, several new launches
have been lined up over FY16 and FY17. Some of the launches such as new XF
and new XJ can help boost the sales of the respective models. Some of the
launches such as Jaguar F-Pace (Jaguar Crossover) and small Range Rover can
help further increase the addressable market share of JLR.
(d) JLR expanding its distribution reach to catch up with peers: JLR currently has
~180 dealer outlets, which is substantially lower than its peers (such as BMW
which has 440 outlets). The management has indicated that it plans to expand its
distribution network by opening 35-40 new outlets annually. Expansion in the
distribution network in China will further support our volume growth estimates for
JLR in China.
JLR continues to report healthy growth rates in other key geographies, with UK and
Europe up 29% YoY in Apr-Nov15 and North America up 28% YoY in Apr-Nov15.
This growth has been driven by strong demand for existing models as well incremental
volumes from the launch of new models such as Discovery Sport and Jaguar XE. We
expect this momentum to continue, as the recent launches continue to do well and
new launches such as new Jaguar XF, Jaguar F-Pace and small Range Rover bring in
incremental volumes. We expect JLRs volumes (ex-China) to continue to report a
strong 15% growth in FY16E and 14% YoY growth in FY17E (CAGR of 15% in FY1517E).
We expect JLR to report 7% YoY growth in overall volumes to 503k units for FY16E
and a strong 14% YoY growth in FY17.
At CMP, the stock is trading at 12.6x adjusted FY17E net earnings (adjusted for
normalised product development charge of 70% instead of 20% used in reported
accounts). Our implied multiple based on target price is 14.4x FY17E adjusted net
earnings.

Ambit Capital Pvt Ltd

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8 December 2015

AMBIT INSIGHTS
Balance sheet (consolidated)
Year to March (Rs mn)

FY15

FY16E

FY17E

FY18E

Networth

562,619

764,097

922,626

1,080,653

Loans

736,104

732,603

732,603

732,603

Deferred tax liability (net)

(13,900)

(13,661)

(13,661)

(13,661)

Sources of funds

1,289,156

1,487,372

1,645,901

1,803,928

Net block

884,795

1,028,152

1,075,099

1,094,449

Capital work-in-progress

286,401

283,145

283,145

283,145

12,405

12,405

12,405

12,405

Investments
Net current assets
Application of funds

105,556

163,670

275,253

413,929

1,289,156

1,487,372

1,645,901

1,803,928

Source: Company, Ambit Capital research

Income statement (consolidated)

Year to March (Rs mn)

FY15

FY16E

FY17E

FY18E

2,627,963

2,728,232

3,160,326

3,525,269

EBITDA

392,387

363,295

427,681

459,728

Depreciation

133,886

171,505

205,667

235,400

48,615

13,110

13,110

13,110

Revenue

Interest expense
Other income
PBT
Provision for taxation

8,987

9,510

20,773

22,890

218,873

188,190

229,677

234,108

76,429

53,810

63,319

64,427

141,710

134,379

166,358

169,681

44.0

39.6

49.0

50.0

FY15

FY16E

FY17E

FY18E

PBT

139,863

188,190

229,677

234,108

WC changes

(36,718)

(21,572)

24,802

9,687

CFO

351,829

323,833

409,937

427,878

(315,396)

(311,607)

(252,613)

(254,750)

(55,212)

(345,189)

(311,607)

(252,613)

(254,750)

130,302

(3,501)

CFF

52,014

57,652

(20,938)

(20,938)

FCF

36,433

12,226

157,323

173,129

FY16E

FY17E

FY18E

Adj. PAT
EPS diluted (Rs)
Source: Company, Ambit Capital research

Cash flow statement (consolidated)

Year to March (Rs mn)

Net capex
Net Investments
CFI
Proceeds from borrowings

Source: Company, Ambit Capital research

Ratio analysis / Valuation parameters (consolidated)

Year to March

FY15

Revenue growth

12.9%

3.8%

15.8%

11.5%

EBITDA margin

14.9%

13.3%

13.5%

13.0%

Net margin

5.4%

4.9%

5.3%

4.8%

RoCE

16%

11%

12%

12%

RoIC

18%

13%

15%

15%

RoE

23%

20%

20%

17%

Net debt / Equity (x)

0.5

0.3

0.1

(0.1)

P/E (x)

9.1

10.1

8.1

8.0

P/B (x)

2.3

1.8

1.5

1.2

EV/EBITDA (x)

3.7

4.0

3.4

3.1

Source: Company, Ambit Capital research

Ambit Capital Pvt Ltd

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8 December 2015