Jaguar Land Rover’s Strong Sales Reflect Strength In Tata Motors’s Underlying Business
Tata Motors (NYSE:TTM) reported weaker quarterly profit in the second quarter of its fiscal 2017 (ending March 2017) due to the one-time impacts of revaluation of assets and liabilities, hedging losses, and adverse commodity derivatives impact. But what remained strong was the volume sales figure for the luxury division Jaguar Land Rover (JLR), which forms more than 90% of the company’s valuation as per our estimates.
Why JLR forms such a large chunk of Tata’s valuation is because of its high price points, broader margins, and strong expected future growth, as compared to the group’s standalone business comprising Tata and other brand vehicles. So far this year, JLR has reported record-breaking results, selling 480,350 vehicles between January and October, up 23% year-over-year.
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According to our estimates, JLR will continue to witness high growth in volume sales over the next few years, especially considering the automaker has opened its Brazilian production plant, and is planning a new plant in Slovakia, which will augment its supply. Trefis estimates Jaguar’s unit sales to grow at a CAGR of 9% between fiscal 2017 (ending March 2017) and fiscal 2024, and Land Rover’s unit sales to grow at a CAGR of 10%.
Most of the foreign exchange impact on Tata Motors’ Q1 and Q2 was at JLR, dragging down the results for the overall company. As the company has hedged currency risks, it could realize losses for some time, however, a weaker pound is expected to benefit JLR over a longer period of time. More than 80% of the vehicles produced in the U.K. are sold abroad. In fact, 60% of the revenue is either linked to the U.S. dollar or depends on it, and 20-25% of the revenue is in euros. The depreciating pound should boost JLR’s top line. The other advantage could be that JLR’s competition, especially the German trio of BMW, Mercedes-Benz, and Audi, could become more expensive in the U.K., as a result of higher model prices in order to mitigate their foreign exchange losses. Either way, JLR’s financial woes due to the Brexit are not expected to be long term. The company is expected to benefit from the continuing high sales growth at JLR.
Have more questions on Tata Motors? See the links below.
- Tata Motors’s Q2 Results Were Marred By FX Revaluation And Hedging Losses
- Three Reasons Why Trefis Is Bullish On Tata Motors
- Tata Motors’ India Business Is Heading In A Positive Direction
- Tata Motors’ 50% Drop In Profits In Q1 Is Not All Bad News
- Brexit Could Be Good Or Bad News For Jaguar Land Rover
- New Compact Models Boost Jaguar Land Rover’s First Half Volumes
- Tata Motors Rides On Strong Q4 Performance By Jaguar Land Rover To Boost Fiscal 2016 Results
- Jaguar Land Rover Steps Up Unit Sales In Crucial Markets
- How Will Tata Motors’ Valuation Be Impacted If Jaguar Land Rover Sells Fewer Cars Than Estimated?
- 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 2017 Results?
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- 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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