Tata Motors (TTMT IN, BUY) - JLR's June vols. slow down; a pick-up likely ahead - RELIGARE

JLR's wholesale volumes for June'13 came in below estimates at 30,536 units, up 8.2% YoY/down 2.2% MoM. While volumes for Jaguar brands remained robust, those for Land Rover were flattish. Retail sales growth also slowed to 7% YoY. For Q1, wholesale/retail growth stood at 8.6%/10.4% YoY. We expect volumes to improve over the coming month as deliveries of the new Range Rover Sport commence. Maintain BUY with a TP of Rs 350.

JLR wholesale volumes up 8.2% YoY to 30,536 units: JLR's wholesale volumes for June came in at 30,536 units (? 8.2% YoY/ ?2.2% MoM) versus RCMLe of ~32,000 units. The growth was largely led by higher Jaguar volumes at 6,182 units (?62% YoY, ?12% MoM), even as Land Rover volumes remained flat YoY at 24,354 units (?1% MoM). Overall, while numbers for the month stood below estimates, July/Aug should see an improvement as deliveries of the new Range Rover Sport commence. For Q1, volumes were higher 8.6% YoY.

Retail volumes impacted by lower Land Rover sales: JLR reported 7% YoY growth in retail volumes (at 33,739units) for June, mainly led by higher Jaguar sales (?34% YoY to 6,574 units). However, Land Rover sales were softer (?2% YoY to 27,165 units) due to: (1) lower sales of Range Rover Sports (?18% YoY), which the company is currently phasing out (deliveries of the new model to begin from Sept'13), and (2) a 8.5% YoY drop in Evoque sales, partly due to supplier-related issues in China. Other LR models, Freelander/Defender grew 13%/9% YoY. Jaguar sales continue to be boosted by the new F-type model, while other models are doing well due to the increasing appeal of new powertrains and All Wheel Drive. Overall, region-wise YoY growth for JLR during June was as follows: Asia Pacific ?34%, China ?11%, Europe: ?7%, North America ?12%, UK ?12%, and other overseas markets up 7%.

Expect deliveries to improve in Q2; maintain BUY: JLR's sales during May/June were partially impacted by a supplier-related issue in China. As per management, the issue was resolved in the first week of June; this, along with commencement of deliveries of the new Range Rover Sport, should aid volumes from July/Aug. Management remains confident of attaining 415k+ unit volumes (12-13% growth) for FY14. We maintain our volume growth estimates for FY14/FY15 at ~14% YoY.

Source : Equity Bulls

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