27 February 2021
Company update | Sector: Automobiles
JLR going back to basics & simplifying business
Expects substantial reduction in net debt and FCF increase from FY23
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
1137.7 / 16
342 / 64
Financials Snapshot (INR b)
Adj. EPS (INR)
EPS Gr. (%)
Net D/E (x)
Div. Yield (%)
FCF Yield (%)
Shareholding pattern (%)
Dec-20 Sep-20 Dec-19
FII Includes depository receipts
Stock Performance (1-year)
Sensex - Rebased
JLR hosted its Investors Day to share its updated strategy ‘Reimagine’ to drive sustainable
recovery and make business fit for future (click
here for the presentation).
‘Reimagine’ strategy is not about catching up but taking a leap and right sizing,
reorganizing and repurposing the organization. It plans to launch 6 Land Rover models in
pure EV form in next 5 years with first launch in FY24. It is targeting >10% EBIT margins
driven by ‘Refocus’ program (3pp by FY24) and architecture consolidation (>3% by FY26).
This coupled with controlled capex at GBP2.5b p.a for next 3 years, it expects substantial
reduction in net debt and FCF increase from FY23 (net debt zero by FY24). Key highlights
from the meeting:
'Reimagine' strategy sets forth roadmap for the future by simplifying business,
making it more agile and focusing on profits over volumes. This strategy revolves
around a) making brands and products more exciting, aspirational and desirable, b)
making architectures electrified as well as simple and flexible, c) collaborations with
the Tata group and other partners, d) rightsize and repurposes its operational
infrastructure and e) refocus on quality, sales, costs and digital transformation.
Under 'Reimagine', JLR is targeting faster growing luxury segments. Its targeted
'Reimagine' segments are expected to grow 2.8% CAGR over FY19-27 as against
estimated 2.2% CAGR for its current segments and 0.5% for the industry volumes. It
is aspiring to increase share by 2x (to 18% by FY26) in segments with better
profitability. This would be achieved through market share gains across geographies,
but particularly in more profitable markets like China, UK and EU.
JLR has laid down its roadmap to electrification, with a) first LR BEV launch in 2024,
b) total 6 LR BEVs in next 5 years, c) pure BEV Jaguar from 2025 and d) full phase out
of pure ICE by FY26. This product plan is expected to lead to pure BEV contribution to
volume at 20% in FY26 and 60% in FY30 (v/s 3% in F20). This would enable it to more
than meet future emission standards and achieve zero tailpipe emissions by 2036
(and net zero emission at business level by 2039).
Further, it would be consolidating its architectures (platforms) from six to three, of
which two would be flexi architecture for LR (MLA and EMA) and one would be
exclusively for Jaguar (Pure BEV). These 3 architectures are expected to deliver ~80%
of JLR volume by FY27.
'Refocus' program is expected to contribute 3pp to EBIT margin by FY24, driven by
reduction in variable marketing expenditure (VME), material cost, warranty cost etc.
Further, it expects consolidation of architectures to drive >3pp EBIT margin addition
by FY26 (expect benefits to start reflecting from 2HFY23). With focus on profits over
volume, it would reduce its manufacturing capacity by 25% over next 5 years. Also,
GBP1b write-off of investments (due to discontinuation of two models under
development) will result in lower depreciation by GBP150m p.a (or 50bp EBIT
It expects capex to sustain at GBP2.5b p.a till FY24 and increase gradually to GBP3b
by FY26. Unlike in the past (where capex was based on aspiration of 1m unit
volumes), it doesn't need to invest in creating capacities and physical infrastructure.
Its guided capex estimates are after factoring in for the planned collaborations. It is
also looking for a partner for Jaguar BEV.
Jinesh Gandhi – Research Analyst
Vipul Agrawal – Research Analyst
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.