FREE

MOSL: TATA MOTORS | FY17 JLR Annual Report Update-Targeting zero tailpipe emissions via mix of power-trains

​TATA MOTORS | FY17 JLR Annual Report Update: Targeting zero tailpipe emissions via mix of powertrains; Improving disclosures on Chery JV and Fx hedges

(TTMT IN, Mkt Cap USD23.0b, CMP INR430, TP INR666, 55% Upside, Buy)

JLRs FY17 annual report gives an update on initiative taken by the management to address changes in the external environment (like connected cars, electric vehicles, forex volatility etc). It is targeting to be zero tailpipe emission company, and would have over 50% of its portfolio with alternative power option by 2020. It is also working on realigning its global sourcing with its sales profile with objective to reduce forex volatility. It is aiming for 8-10% EBIT margin over five-year period, supported by the continued launch of new products and technologies to drive growth with greater operating leverage. Key highlights from JLR’s FY17 annual report:

Volume outlook positive, with EBIT margin target of 8-10%: Solid economic growth in key markets of China, US, EU and UK, coupled with robust pipeline of new products would drive strong volume growth for JLR in FY18 and beyond. Despite near term headwinds of higher incentives, JLR is targeting EBIT margins of 8-10% driven by new products led operating leverage.

Targeting zero tailpipe emissions: Through a combination of low-emission technologies and electrification, JLR is targeting to reduce European fleet average tailpipe CO2 emissions by a further 25% by 2020. By 2020, ~50% of its product portfolio would have an alternative power option.

Chery JV EBITDA margins at 24%: Chery JV ramp-up continues with 96% revenue growth and EBITDA margins of ~24% in FY17. Overall China revenues (including JV) grew ~15% to GBP6.85b.