JLR numbers turn positive; fundamentals may soon see a turnaround

The auto major, Tata Motors clocked gains of 5 per cent during today’s early trade, owing to a strong set of numbers for the September quarter. Its premium car brand, Jaguar Land Rover (JLR) reported very encouraging numbers during the quarter.

However, its consolidated sales and net profit have declined during the quarter on a YoY basis. For the past three financial years, JLR numbers have weighed heavily on its consolidated financial numbers. In the early days of 2016, demand from China and Europe first started showing a declining trend in its sales numbers. Since October 2017, the stock has corrected as much as 67 per cent.

In recent times, there have been strong signs of recovery in JLR’s performance. This segment returned to profit along with positive cash flow at the end of the quarter. The gains are significant as these are led by sales and revenue growth from China. Sales in China were up by 14.6 per cent during the last quarter and 3.7 per cent on a YoY basis.

The investors would also consider a few important triggers before any investment decision. Most important is its domestic sales. In the past two quarters, sales numbers have seen a positive trajectory. Its newly launched vehicles have also seen strong bookings. In September 2020, it marked 21,000 units sale, which is its 8-year high.

Now, the most important question is, whether one should consider this as a buying opportunity at this juncture. It is currently trading just 0.20 times of its FY20 sales. Hence, from a valuations’ perspective, the stock may look cheaper but still, a few market participants are in wait & watch mode. One important parameter that now looms over is clarity in whether the demand revival seen in the last few days is actual or just a pent-up demand.