Buy Mah and Mah; target of Rs 973: Motilal Oswal

“M&M 1QFY13 results (incl MVML) were above estimates with EBITDA margins of 13.9% (v/s est 12.6%) and PAT up 26% at INR 7.78b (v/s est INR 6b), driven by higher realizations and lower other expenses. Results are not comparable on YoY basis due to merger of MADPL from 4QFY12."

"S/A net sales grew by 40%YoY to INR92.5b (v/s est INR84.6b), driven by volume growth of 14.4% YoY (-6.8% QoQ) to 182,149 units (v/s est 180k). Realizations were up 7.4% QoQ (22% YoY) at INR507, 173 (v/s est INR468,645/ unit) driven by a) product mix improvement (led by XUV5OO), b) price increase to offset cost pressures and c) benefit of weaker INR on exports. S/A EBITDA grew by 24% YoY (+14% QoQ) to INR11.1b (v/s est INR9.1b), translating into EBITDA margins of 11.8% (v/s est 10.7%) driven by higher realizations and lower other expenses. Lower than expected interest cost, depreciation and tax further boosted S/A PAT at INR7.3b (v/s est INR 5.4b). The management has lowered its tractor industry guidance to upto 2% growth (v/s 5-6% earlier) for FY13. However, it maintained its guidance for UV volumes at 12-14%. Inventory, both in the tractor and UV business, remains at comfortable levels."

"We are upgrading our EPS estimates for FY13/FY14 for M&M+MVML by 9%/5% to INR55.3/ INR61.2, and consolidated EPS by 8%/4% to INR62/INR81 respectively. The stock trades at 11.8x FY14 S/A EPS (incl MVML) and 8.8x FY14 consol. EPS. Maintain Buy with target price of INR973 (FY14 SOTP),” says Motilal Oswal research report.

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