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JLR’s FY22 Annual Report highlights the company’s strategic focus on two targets becoming one of the most profitable luxury manufacturers (possibly, with lower volume ambitions), and driving sustainability through rapid electrification, said brokerage IIFL in a note. 

"JLR has brought down break-even level by ~50%; this augurs well for profitability as volumes normalise. Although management’s target of double-digit Ebit margin by FY26 looks ambitious, it cannot be ruled out. JLR has seen build-up of strong order-book with good response to recent launches and high expectations from the upcoming RR Sport. This should translate into higher volumes/earnings in FY23/FY24, as production ramps up," the note stated.

The company's management has reiterated its target of reaching near-zero net debt by FY24 and analysts at IIFL believe this is achievable if production level normalises quickly. The brokerage has Buy rating on Tata Motors shares with a 12-month target price of 515, implying a potential upside of over 32% from current stock level.

In address to shareholders in the company's annual report for 2021-22, its Chairman N Chandrasekaran said the company's three independent business units, commercial vehicles, passenger vehicles and Jaguar Land Rover, are self-sustaining and the automaker is confident that it would get to near zero net automotive debt by FY24.

JLR has brought down break-even level by around 50%, by improving contribution margins (cutting out low-margin models) and lowering fixed costs.

Further, management reiterated its target of attaining 60% sales contribution from BEVs by 2030. JLR targets transforming Jaguar into a pure electric brand by 2025. The company plans to launch its first Land Rover BEV in 2024 and six Land Rover BEV models by 2026.

“JLR’s focus on profitability over volumes meant that JLR has been less inclined to push low-priced models with discounts and marketing costs. In FY22, in the face of production constraints due to chip shortage, JLR prioritised higher-margin products to a much larger extent. As a result, the sales mix shifted in favour of higher ASP/higher-margin models," IIFL added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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