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Semiconductor availability improves QoQ, but misses our estimates

Order book at 168k units| Range rover launched successfully

Wholesale volumes improve by 11% QoQ

Wholesale volumes for JLR (excluding the CJLR JV) declined by 38% YoY (+11% QoQ) to 76.5k units in 4QFY22 (est. 81.7k units).

Production improved by 15% QoQ to 82.7k units in 4QFY22, reflecting an improvement in semiconductor supplies.

On a QoQ basis, Wholesale volumes for Defender/Range Rover Sport/ Discovery grew by over 23%/14%/29%, reflecting further improvement in its mix. It delivered 1,910 units of the new Range Rover, with production of the prior model now running out.

While Wholesale volumes in 4QFY22 are lower than our estimated 81.7k units, the product mix seems to be much better, diluting the impact of operating deleverage. As against our EBITDA/PAT estimate of GBP710m/ GBP124m, based on actual volumes, we estimate an EBITDA/PAT of GBP650m/GBP54m in 4QFY22.

Accordingly, our consolidated PAT estimate for 4QFY22 changes to a net loss of INR546m (v/s our estimate of a PAT of INR586b).

Retail volumes

Retails for JLR (including JVs) fell 36% YoY and 1% QoQ to 79k units. The same for LR/Jaguar declined by 36%/38% YoY.

All regions declined YoY in 4QFY22, while only North America, the UK, and the RoW grew by 5%, 34%, and 10% QoQ, respectively.

The management saw a gradual improvement in semiconductor supplies, leading to improved production and Wholesale volumes as compared to 3QFY22. The same is expected to continue in FY23.

Order book grew over 168k units in 4Q (v/s 154k units in 3QFY22). Demand for the new Range Rover and Defender are particularly strong, with orders of over 45.5k units and 40k units, respectively.

Mr. Lennard Hoornik, Chief Commercial Officer, JLR, said: “The successful Range Rover launch, as well as the momentum gained from Defender, has resulted in a steadily increasing order book (at a record 168k units). Customers’ response to the first deliveries of the new Range Rover are strong. We remain optimistic for the future, despite the present geopolitical and macro-economic challenges plaguing the industry."

Impact of the Russia-Ukraine conflict: “The conflict in Ukraine has not materially impacted our Wholesale volumes in 4QFY22. The impact on production has been limited due to active management of the parts supply chain, including developing alternatives for a relatively small number of parts that are sourced from affected countries. It is difficult to predict how supply and inflationary pressures will impact the coming quarters,” he added.

Valuation and view: All three businesses of TTMT are in recovery mode. While the India CV business will see a cyclical recovery, the India PV business is in a structural recovery mode. JLR is witnessing a cyclical recovery, supported by a favorable product mix. However, supply-side issues will defer the recovery process. While there are no near-term catalysts from the JLR business, the India business (~50% of SoTP) will see a continued recovery. The stock trades at 14.1x FY23E consolidated EPS and 2.6x P/B. We maintain our Buy rating with a TP of INR530/share (Mar’24E SoTP-based).

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