Accumulate Tata Motors - JLR records strong volume in November 2012 - Angel Broking

- Jaguar and Land Rover (JLR) recorded a strong wholesale volume growth of 18.7% yoy (24.2% mom) to 34,649 units for the month of November 2012, which was ahead of our estimate of 28,500 units, led by robust growth across Jaguar and Land Rover.

- Jaguar sales posted a strong growth of 17.8% yoy (87.5% mom) driven by dispatches of the model year 2013 models. During the month, JLR began dispatching the all-wheel-drive XF and XJ models (mainly to US) and smaller engine versions of XF and XJ (majorly to China).

- Land Rover sales too registered a robust growth of 18.9% yoy (15.6% mom) backed by strong growth in the sale of Evoque and Freelander models. The sales benefitted from the start of the third shift at the Halewood plant which eased the production constraints for Evoque (~11,000 units vs. ~9,500 units in October 2012) and Freelander (~5,000 units) models.

- The volume performance for global peers like BMW, Audi and Mercedes remained strong in November 2012 driven by growth in China and US.

- BMW's global sales jumped 26.3% yoy (9.5% mom) driven by 62.3% and 29% yoy growth in China and US respectively. Further, strong momentum in X1, X3, 1 and 3 series fuelled the overall growth. The management expects the sales momentum to continue led by ramp-up in China and strong demand across models (mainly X1, X3, 1 and 3 series).

- Audi too posted a strong growth of 13.9% yoy (flat mom) driven by the SUV (Q3, Q5 and Q7) and A5 models. China and US continue to drive the overall growth of the company (sales up 25.9% in China and 18.6% in US). However, Europe posted a decline of 1.9% as sales in Italy, Spain and France declined by 18.9%, 14.3% and 11% yoy respectively led by uncertain economic environment in the Euro region.

- Mercedes registered a 16.4% yoy (9.8% mom) growth led by continued momentum in compact car (up 38.1% yoy) and SUV (16.3% yoy) sales.

- JLR reported a strong retail volume growth of 13.5% yoy (18.7% mom) in November 2012 to 29,893 units driven by strong growth in Land Rover volumes (Evoque in particular; sales up 38.9% yoy) which posted better-than-expected growth of 17.2% yoy (16.7% mom).

- Total volumes ex. Evoque however grew by a modest 4.1% yoy largely due to 38% yoy decline in Range Rover volumes which is set to be replaced by the new Range Rover (retail deliveries to begin from January 2013). Nevertheless, total volumes ex. Evoque on a mom basis reported a strong 17.3% growth as the performance benefited from the ramp-up in production at the Halewood plant (now running on three shift basis). This resulted in a 28.8% growth in Freelander sales.

- Jaguar sales registered a decline of 5.4% yoy in anticipation of the retail launch of the model year 2013 products, ie the XF Sportbrake and the allwheel drive and smaller engine options in the XF and XJ models. Jaguar sales during the month witnessed a yoy de-growth across all the models. Nonetheless on a mom basis Jaguar volumes surged 33.9% led by a robust growth in China (up 250.3% mom) and Rest of the World (42.8% mom).

- Geographically, the growth in China continues to remain strong, with volumes up 43% yoy (47.9% mom) during the month. The Asia- Pacific region too grew strongly by 25.9% yoy (13.3% mom) in November 2012.

Outlook and valuation: We retain our positive view on JLR and expect a 12% volume CAGR over FY2012-14E driven by Evoque and new product launches (Range Rover, Range Rover Sport, Jaguar XF Sportbrake and all-wheel drive and smaller engine options in the XF and XJ models). Further, a favorable market and product-mix and stable commodity prices will help mitigate raw-material cost pressures. We recommend an Accumulate rating on Tata Motors with a sum-of-the-parts (SOTP) target price of Rs.319.

Source : Equity Bulls

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