Moneycontrol Bureau
Worries about Tata Motors' Jaguar Land Rover retail sales in China continues as it reported flat growth in June. JLR total retail sales in China (June) was at 39602 units. Landrover China sales was up merely 1 percent (year-on-year) at 32447 units while Jaguar sales slipped 6 percent (YoY) at 7155 units during the month. However, China slowdown has already been priced in, with the stock diving around 4 percent on Tuesday.
China sales was weak due to softening market conditions and delay in production ramp up of local Evoque also hit sales in the country. JLR retails in China declined 46 percent in June 15 reflecting overall slowdown in demand as well as transition of the Evoque from UK to Chery JV.
According to Citi's estimates JV-related issues are impacting monthly retails in China by 3,000 units. While the company has cut prices of the locally made Evoque by 5-11 percent to boost demand, Citi still thinks there are downside risks to current volume estimates which stands at 31,000 units of Evoque sales in FY16. HSBC says price cuts may not help as dealers are already offering huge discounts on Evogue.
Citi says every 10,000 unit reduction in the China JV impacts their target price by 2-3 percent which is on account of lower revenues in the JV and lower royalty and spares income in JLR.
Meanwhile, HSBC has slashed target price by 15 percent to Rs 490 per share stating that luxury demand weakening and may not recover in near term. It has reduced earnings per share (EPS) estimates 17 percent.
However, volume growth of JLR was strong in other countries excluding China. Retail volumes in Europe was up 47 percent, up 25 percent in UK and up 12 percent in North America.
Some analysts are still building in hopes as growth in other territories besides China has shown growth. “While JLR is reporting healthy growth in the US and Europe, management is taking measures in China to revive volumes - they have cut prices of the Evoque this month and have reshuffled the local management. JLR will benefit from a refreshed product lineup including the new products at Jaguar,” says JP Morgan.
At 10:01 hrs Tata Motors was quoting at Rs 389.80, up Rs 4.05, or 1.05 percent on the BSE.
Posted by Nasrin Sultana
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
