Q4FY18 results highlights
Key positives: Improvement in China profitability
Key negatives: Change in capitalisation policy; weak standalone margins
Impact on financials: We cut our FY19 and FY20 EPS est by 15%/14% on (a) lower JLR volumes (b) limited currency benefits for JLR and (c) margin cuts to the standalone and JLR on a change in accounting policies
Valuation & view
The concerns with JLR persist. The car market in USA/UK remains challenging with rising competitive intensity at a time when the company’s recent launches (Discovery) have not been successful. The shift towards electric vehicles in the next 1-2 years potentially has a greater negative impact on smaller players such as JLR. While the stock has corrected nearly 34% in the past year, we believe the risks persist. Maintain Neutral with a target price of Rs340.
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