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Healthy all-round performance in FY24; de-leveraging on track

In 4QFY24, JLR reported EBITDAM of 16.3%. 170bps YoY improvement was led by higher operating leverage and lower RM cost. India business (CV+PV) EBITDAM stood at 10.5%, 50bps above JMFe. Supply normalization aided JLR in reducing its order backlog to c.133k units. While the US market continues to be strong, demand environment in EU has turned sluggish. Management indicated of higher marketing spends going forward to drive JLR’s order book. FY25 EBIT margin is expected to be flattish. Strong FCF generation is expected to support investments towards electrification at JLR and the company is on track to turn net cash by FY25 (£0.7bn currently). In the domestic PV segment, new launches/ramp-up of capacity is expected to drive growth. Domestic CV demand is also expected to pick-up from 2Q. Improving margins for both domestic CV and PV segments augurs well and net cash position in India auto business provides comfort. Maintain BUY with Mar’25 SOTP of INR 1,200 (standalone / JLR valued at 12x / 3.0x EV/EBIDTA). Slowdown in key global markets remains a monitorable.

*  JLR –margin misses estimates: JLR reported revenue of £7.86bn (+11% YoY, +6% QoQ), 2% below JMfe, led by unfavourable model mix. Wholesale volume (ex-CJLR) grew 16% YoY to c.110k units (+9% QoQ) on receding supply constraints. Normalisation of component supplies helped the company lower order backlog to 133k units (vs.148k units at 3Q end). EBITDA margin stood at 16.3% (+170bps YoY; +10bps QoQ), 50bps below JMFe. Margin miss was primarily owing to higher variable and fixed marketing (VME & FME). FCF stood at positive £892mn for 4QFY24 (positive £2.3bn for FY24). Share of electrified model stood at 79% during 4Q, with 16% share of BEVs & PHEVs. For the upcoming RR Electric c.33k+ customers have signed-up so far.

*  JLR – outlook: TTMT highlighted that demand environment in North America (NA) continuous to remain strong. However, EU market has turned sluggish. JLR’s order backlog continues to remain healthy at 133k units (vs. avg.110k units pre-covid). The company indicated that it will continue to focus on brand activation (through higher VME and FME) to maintain order book. Despite this, JLR has guided for flattish EBIT margin in FY25 over FY24 (c.8.5%). FY25 investment guidance stands at over ~£3.5bn (£3.3bn in FY24). Current net debt stands at £0.7bn (vs. £3bn at FY23 end) and the company expects to turn net cash by FY25

*  India business – strong performance: Standalone revenue (pro forma of India CV + PV business) stood at INR 347bn (+8% YoY, +10% QoQ), 3% below JMFe. Standalone business reported a positive FCF of ~INR 48.7bn during 4Q (INR 48.5bn in FY24) led by healthy operating performance and reduction in working capital. EBITDAM stood at – CV: 12% (+90bps QoQ; JMFe +50bps), PV: 7.3% (+70bps QoQ; JMFe +50bps).

*  India CV segment performance and outlook: CV segment EBITDA margin stood at 12% (+190bps YoY, +90bps QoQ). YoY improvement was led by better realisation (incl. lower discounts) and lower RM cost. Fleet owners’ sentiment index and freight index continue to remain healthy. The management expects CV demand to pick-up from 2QFY25 (1Q to remain muted owing to general elections). Overall, it expects CV industry to report flattish to slight decline in volumes during FY25. Continued focus of GOI on infrastructure spends remains industry tailwind for medium-to-long term. Company’s focus will be on improving market share in SCV segment, driving higher realisation for overall CV business and scaling up e-CVs.

*  India PV segment performance and outlook: PV segment EBITDA came-in at 7.3% (flat YoY, +70bps QoQ). Share of EV/CNG vehicles in total volumes stood at 13%/ 16% during FY24. EBITDA margin for EV business (excl. product develop cost) stood at +1.1% during 4Q (0.2% in 3Q). Management indicated that 1) softening of key RM prices (incl. battery cost), 2) higher operating leverage, and 3) PLI incentive is expected to support EV business margins going ahead. Near-to-medium term focus is on driving EV penetration by leveraging expanded range of products and expanding charging infrastructure. With respect to ICE business, recently launched CNG variants are driving growth. The company indicated that it plans to launch Tata Curvv in 2H 2024 and Tata Sierra in 2H 2025 in addition to multiple refresh/facelift models going forward. Sanand facility commenced production in Jan’24. Currently it produces 6.5k cars/month and TTMT plans to ramp this up gradually to 10k/15k cars/month going forward

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