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‘Reimagine’ to drive JLR transformation

Project Charge+ delivers margins, drives debt reduction

Jaguar Land Rover (JLR)’s FY21 Annual Report focuses on the company’s next phase of growth. The company has outlined its strategy for the transformation to electric mobility and to focus more on profitability over volumes. Here are the key points from the Annual Report:

* As per the message from CEO Thierry Bolloré, the ‘Reimagine’ strategy would transform the business and its distinct brands. It would create a knowledge-sharing collaborative ecosystem with the very best partners in the global industry for a massive leap in clean energy, software, and digitalization. Its goal is to deliver double-digit EBIT margins and be among the world’s most profitable luxury manufacturers.

* Both the Jaguar and Land Rover brands would undergo transformation by electrification – six new all-electric Land Rover models would be introduced in the next five years and Jaguar would be completely reimagined as a purely electric brand from 2025. JLR aims to have full-BEV powertrains accounting for around 60% of the total JLR sales by 2030 and 100% of volumes by 2036.

* By the end of the decade, it would migrate from six different architectures to just three central to its new architecture strategy, in line with the accelerated shift to electrification.

* The ‘Reimagine’ and ‘Refocus’ projects would together deliver revenue of over GBP30b and double-digit EBIT margins by FY26. These would generate strong positive free cash flow from FY23 after an around GBP2.5b investment spend (annually) and a reduction in net debt, returning to a net cash position in FY25.

* The Reimagine strategy would drive the journey toward net zero carbon emissions by 2039. Currently, 12 models have electrified options, including eight plug-in hybrids, 11 mild-hybrids, and one BEV.

* JLR is seeing greater collaboration and synergies within the Tata Group in areas of clean energy, connected services, data, and software development. It aims to create next-generation-based electrical vehicle architecture – EVA continuum – developed along with Tata Consultancy Services.

* FY21 saw outflow of GBP24m toward working capital changes, largely due to outflow of GBP433m on the release of provisions for residual value risk and emissions, primarily in the US.

* Both the JLR and India businesses are on the path to cyclical recovery. This, coupled with restructuring initiatives, would drive further debt reduction. The stock trades at 10.5x FY23 consol. EPS and 3.5x EV/EBITDA. Maintain Buy, with TP of INR405 (Mar’23 SOTP).

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