HomeAuto NewsJLR may incur emission costs about 1 billion pound in FY22

JLR may incur emission costs about 1 billion pound in FY22

Tata Motors Jaguar- Land Rover’s India business will continue to improve helped by commercial vehicles sales and cost controls while its overseas business might face a tough outlook with weakening demand and rising incentives.

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By Suman Singh  August 22, 2018, 9:52:19 PM IST (Published)

JLR may incur emission costs about 1 billion pound in FY22
Swiss investment bank, UBS expects Tata Motors Jaguar- Land Rover may incur incremental emission-related cost of 1 billion pound per annum by FY22, as it strives to meet tough emission norm targets in the UK, European Union and China which will continue for 6-12 months, adding that cost-savings from the commencement of its Slovakia plant in FY20 could only partly offset this.


Tata Motors Jaguar- Land Rover’s India business will continue to improve helped by commercial vehicles sales and cost controls while its overseas business might face a tough outlook with weakening demand and rising incentives, Swiss investment bank UBS said, with a neutral outlook on the company and a reduced price target at Rs 280 per share, 28 percent below the consensus EPS forecasts for FY20.

“We raise our FY19/20 EBITDA margin estimates for the domestic business to 9.2 percent/10.3 percent, from 8.3 percent/9.5 percent, respectively, following better-than-expected Q1FY19 performance and raise our car volume growth forecasts. However, we expect margins to peak in FY20, supported by BS-6-related (new emission norms) pre-buying for CVs,” UBS said, adding that CVs are likely to drive strong earnings growth, with operating leverage supporting further margin expansion.

However, the investment bank has cut its volume target growth from 5 percent to a negative 2 percent hurt by the continuous rising discounts in the US market which points at a more challenging demand outlook.

“We now expect Tata Motors' FY20 operating margin to be below the lower end of management guidance of 4 percent, despite a strong forex tailwind. Given negative operating leverage, we believe JLR will need to take hard decisions to cut absolute costs to support profitability,” UBS said.
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