Ventura is bullish on Mahindra and Mahindra (M&M) and has recommended buy rating on the stock in its February 12, 2013 research report.
“Mahindra & Mahindra (M&M) posted 28.5percent yoy growth in revenues to Rs. 10774.3 crore led by a strong volume growth in the automotive segments (+20.7percentYoY). Although, operating profits were higher by 18.4percent yoy to Rs. 1,211.3 crore margins were lower by 100 bps and stood at 11.2percent. The profits were higher by 26.3percent yoy to Rs. 836.2 crore as compared to Rs. 662.2 crore in Q3FY12 mainly on account of lower tax outgo (21.1percent in Q3FY 13 v/s 27.6percent in Q3FY12) due to higher R&D related expenses and clubbing of tax benefits from Haridwar/ Rudrapur plant for prior periods. Automotive segment revenues were higher by 58percent yoy to Rs. 7360.6 crore aided by a 20.7percent yoy growth in volumes to 1,46, 878,237 units. Company has a waitlist of 1 month for Quanto and 2 month for Rexton. XUV demand stays strong and capacity would be maintained at ~4,500 units per month. In FY14.the company has guided for 4 refreshers in Automotive segment. Inventory in the tractor segment is less than 2 weeks at the plant and less than 3 weeks at the dealer. The company is working on 3 new products in the automotive segment.”
“Farm equipment segment registered a growth of 4.7percent yoy in total revenues to Rs.3403.9 crore. However,voumes declined by 1percent on YoY basis on account to poor winter monssons. The tractor volumes for Q3FY13 stood at 64,800 units. The company expects a pick up in tractor demand in FY14 (4-6percent YoY growth). On YTD basis, tractor volumes have declined by 5percent. Inventory in the tractor segment is less than 3 weeks at the plant and less than 5 weeks at the dealer. Company is planning to launch a new tractor brand in FY14. Notably, the last brand launch launch was in 2001 (Arjun). The company increased tractors prices by Rs 12000 in the month of April of which Rs 6000 was on account of hike in excise duty and Rs 6000 was due to increase in input cost . Further, the company hiked tractor prices by Rs 7000 in the month of October on account of increase in input cost. YTD price increases in the tractor segment is ~ Rs 20,000 per tractor. In Automotive segement the company has on an average hiked prices by 1-3percent in month of January.”
“Robust topline growth aided by volume growth in automotive segment and price increases, subdued farm equipment business & lower taxes (clubbing of tax benefits from Haridwar/ Rudrapur plant for prior periods) were the key highlights of M&M Q3FY13 earnings. We expect this momentum to continue led by its strong portfolio and new launches in the automotive segment. Although, the tractor industry continues to remain under pressure, we expect the tractor industry to revive in FY14 on the back of pent up demand and volume degrowth in FY13 . At CMP of Rs.883, the stock is trading at 17.7x and 15.4x its estimated FY13 and FY14 earnings estimates and we recommend a BUY on the stock,” says Ventura research report.
Institutional holding more than 40% in Indian cos
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