JLR’s management shared specifics of its electrification tactic at its annual investor day (Feb 26). The essential takeaways incorporate pivoting portfolio towards focussed luxury (away from mass luxury) with Jaguar pure BEV platform top the technologies transition zero pure ICE model sales by FY26 platform consolidation (6 down to 3) will be essential to building excellent, expense efficiency hence, capex devote will be ~£2.5bn, to incorporate all the needed EV investment and confident of reaching monetary targets of ≥7%/10% EBIT margin by FY24/26, respectively. We have been impressed by the coherent framework laid down by the management towards reaching client delight by means of higher excellent aspirational EV solutions whilst maintaining profitability at the centre of capital allocation. JLR is prioritising excellent, technologies more than volumes (moving away from the Big-3 German players) we think investors also require to incorporate other luxury EV players (e.g. Lucid, Nio) for a holistic peer valuation evaluation. Maintain Get.
Further highlights of the occasion: Jaguar brand will be positioned as an all-electric (by FY25) modern day luxury brand with concentrate on radical style and most effective-in-class technologies to attract a younger client base vis-à-vis its previous. The management also expects ~60% Land Rover sales to come from electric segment by FY30, whilst in the next 12-18 months, new model launches of RR/RR-Sport/Defender-130 are most likely to drive development.
Refocus programme requires more than from project Charge (generated lifetime savings of ~£6bn), and is developed to provide incremental £2bn/4bn of expense reduction in next 3/5yrs, respectively. Few of these prospective savings are most likely tied up with platform improvements (e.g. decreased warranty, material fees) whilst other large-information analytics initiatives (InDigital) could drastically boost the excellent of sales.
Capital investments will stay at ~£2.5bn till FY25 (FY26: ~£3bn), and will encompass the 3 new platforms (MLA Flex, EMA native BEV, Pure BEV) and other new technologies investments. We think the move away from ICE technologies towards future technologies (EVs, hydrogen) on investments could help JLR’s terminal worth.
The management clearly emphasised that its guidance on different monetary targets has space for positive surprise: a) EBIT margin ≥7%/10% in FY24/26, respectively, zero net debt by FY24, c) sturdy FCF pre-restructuring fees FY22 onwards, FY26 income target of >£30bn (>8% CAGR FY21-26). We have raised our JLR EBIT margin estimate to 6.% (earlier: 5.3%) for FY23, however nicely beneath the management guidance of ≥7% EBIT margin in FY24.