JLR - Sarria Daily Comments 02/11/2021

JAGUAR LANDROVER — (Tomás) JLR reported weak but in line numbers yesterday afternoon. The Company had guided the market on the numbers recently and the short-term issues (including the chip shortages are not a surprise). The rebound in sales should be strong given the low inventory levels and record-high backlog of orders including 32k Defender orders. Cash flow was better than expected on the back of reduced investment (CAPEX) and working capital movement.

Conclusion: Medium-term JLR has some tailwinds from order book and improved chip supplies. However, we remain concerned about the powertrain mix and although 66% is electrified, only 3% is fully electric. The transition, via significant investment CAPEX, is difficult to gauge. But in the meantime, JLR have ample liquidity and limited near-term maturities. We will update our model post-call with management.