Reliance Securities sees JLR sales growth at 15%, sees margin pressures

Despite the recent decline in profit margins, Tata Motors’ Jaguar Land Rover business will grow at an average rate of 15% in the current financial year and the next, said Reliance Securities. It also said the domestic business has surprised on the upside with recent results.

It said it expects JLR business to “remain on a strong footing” due to 1) new product pipeline remains very strong, 2) demand from China to pick-up 3) capacity expansion/JV with Chery and 4) expansion of the sales network.


Tata Motors reported a weak fourth-quarter with JLR missing margin estimates. In contrast, the company’s India business, which has seen new launches such as the Bolt and the Zest, surprised on the upside.

JLR reported weak EBITDA margin at 17.4%, down 1.14 percentage points when compared to the third quarter, because of negative movement in realized hedges and new launch related costs.

However, standalone division, largely the India business, posted a positive EBITDA margin after 5 consecutive quarters of losses. EBITDA or operating profit margin was 2.8%. Analysts were looking 0% margin, or break even.

Revenue for the standalone division increased by 27% yoy, led by strong realization growth owing to better product mix.

“Management highlighted that demand outlook for its products remain strong, however, the company remains in a transition phase impacting near-term performance,” Reliance Securities said.

Medium and heavy commercial vehicle revival has been on a robust footing with strong replacement demand aiding growth and management expects this trend to continue in FY16E, pointed out the broker.

“However, main revival would be seen once economic activity pick up pace; we build in a slow revival in its domestic business and forecast CV volumes to grow by 20% in FY16E. Overall, we expect the domestic standalone business to be profitable by FY16.”

Reliance Sec however trimmed its estimates due to what it called “some slowdown as well as margin pressures due to currency and launch related expenses.”