JLR’s unexpected boost

“In the three months to December 31, profits rose 41% compared with 2010 to 34.1bn rupees ($692m; £441m), with sales up 44% to 453bn rupees. Its Jaguar Land Rover (JLR) arm saw sales rise 37%, helped by selling 32,000 of its new Range Rover Evoque.” - BBC

“China accounted for 17.2pc of sales, overtaking the UK – which made up 16.5pc – for the first time in JLR’s history.” Telegraph

With the help of the new Baby Range Rover (Evoque) and substantial sales increase of Jaguar XJ, XF, JLR enjoyed a strong boost of confidence in the otherwise uncertain NYSE. TTM’S (JLR’s mother…) stock price has climbed up from around $14 a share in Sept 2011 to $27.77 as of the last trading day. This certainly reflects the success of expanding the product range to the more economical and lower-priced car market segment. I was right in predicting that Jaguar Land Rover, two legendary upper class luxury brands, would benefit from a big surge of volume once they lower their bars. Who wouldn’t pick an affordable yet luxury&style badged Jaguar or Land Rover over a try-so-hard-to-be-upperclass Hyundai? Afterall, it is why the “Baby BMW” (3-series) is so successful and carries the company.


JLR’s stock price may fall back a little from this feverish wave. There probably won’t be any similar jump, nor big drop, until the Q1 2013 results come out. The next big things in the pipe line are the, allegedly, launches of 2013 Range Rover and XF Sportsback in Geneva Autoshow in March. Land Rover products will be slowly upgraded to refresh the excitement in the already mature and successful line-up. The expansion of the Evoque line (possibly a Grand-Evoque and, as Top Gear mentioned, a sexy drop-top version) will consolidate and build upon the initial success. Jaguar’s already-existing-economical-models will benefit from the addition of the XF Sportsback; keep in mind that 30% to 40% of Merc E, BMW 5 and Audi A6 sold in Europe are Estate(or Sportsback) variants, so really that’s where the volume is at. The enormously popular Jaguar CX-16 will most definitely have the green flag from Jaguar’s management in either late 2012 or early 2013. It’ll be a big hit as 2 seats sports cars are really the soul and foundation of Jaguar, and look what magic happened 40 years ago when the E-type came out…Anyway, the Jaguar’s “phase 1” develope stage, as head designer Ian Callum calls it, is complete. It has successfully rebuid its image and entire product line and design language. In the next 3 to 5 years, Jaguar will really start to pick up some serious sales (not that it hasn’t already) with a more mature and complete lineup. We’ll all “patiently” wait for the day when the baby Jag challenges this dark world ruled by BMW 3’s.


In terms of investment, all of this translates into a very solid confidence of JLR’s near future. I think it’s reasonable to wait for this recent fever to die down a bit and then invest when the stock price falls back to about $20 a share. The next big chance to sell, or to potentially fret, is when JLR announces the results of its partnership deal with Chery to build factories in China. If the Chinese government gives the green flag, then JLR product prices in China will be spared from the back-breaking import duties and decrease by a solid 30 to 40%. Considering that people are willing to pay 20% extra to skip the lineup for a hot Evoque and that Jag’s 3Q FY sales quadrupled from the year before, a 40% discount in the entire product range will very likely kill the local dealers with facial spasms from smiling. On the flip side, if the deal fails…Therefore, I recommend to cash out some, maybe half, of your TTM shares at this point, and gamble the rest for the decision soon to come out in China. 

p.s  a gift to those serious investor  http://www.tatamotors.com/investors/pdf/2012/Q3-investor-presentation_FY2012-IFRS.pdf 

-Daniel W.

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