How Will Tata Motors’ Valuation Be Impacted If Jaguar Land Rover Sells Fewer Cars Than Estimated?

Jaguar Land Rover (JLR) forms more than 90% of Tata Motors‘ (NYSE:TTM) valuation, as per our estimates. The British marquee brand ended 2015 with 5.3% year-over-year growth in retail sales. We estimate Jaguar’s unit sales to rise at 9% CAGR through fiscal 2020 (ending March 2020), and Land Rover’s unit sales to rise at 7% CAGR, boosted by the launch of new compact models, which are expected to boost volumes. However, unit sales growth for Jaguar could slow to 7% CAGR, and Land Rover’s could fall to 5% CAGR, if the Chinese automotive market slows down and emerging markets don’t recover as expected. Moreover, the boost in JLR’s retails in the last year has been due to growth in North America and Europe. Volume growth in developed markets could slow down considerably going forward, after the initial spurt of refilling fleets, following the recession, has ended. This could slow down JLR’s retail sales growth. In addition, given that automotive companies have a high degree of operating leverage, lower volume sales are also expected to drag down the EBITDA margin.

According to our estimates, this scenario will entail an almost 15% decline in Tata Motors’ equity valuation in fiscal 2020.

Have more questions on Tata Motors? See the links below.

• What Will Be The Jump In Tata Motors’ Valuation If Jaguar Land Rover Sells More Cars Than Expected?
• Where Does Jaguar Land Rover Stand Relative To The German Top 3 In Crucial Markets?
• What’s Tata Motors’s Fundamental Value Based On Expected Fiscal 2016 Results?
• How Has Tata Motors’s Revenue And EBITDA Composition Changed Over FY12-FY16?
• By What Percentage Have Tata Motors’s Revenues And EBITDA Grown Over The Last Five Years?
• What Is Tata Motors’s Revenue And EBITDA Breakdown?
• Where Will Tata Motors’s Revenue And EBITDA Growth Come From Over The Next Three Years?
• Why Jaguar Land Rover Forms More Than 90% Of Tata Motors’ Valuation

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