Buy M&M; target of Rs 815: Emkay

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Buy M&M; target of Rs 815: Emkay

Emkay Global Financial Services is bullish on Mahindra and Mahindra (M&M) and has recommended buy rating on the stock with a target of Rs 815 in its February 7, 2012 research report.

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Emkay Global Financial Services is bullish on Mahindra and Mahindra (M&M) and has recommended buy rating on the stock with a target of Rs 815 in its February 7, 2012 research report.

"Mahindra and Mahindra (M&M), net sales at Rs 83.7bn vs our est. of Rs 80bn benefitted from lower excise duty (6.2% vs est. of 7.7%) due to higher production from MVML and higher other operating income (Rs 596 vs est. of Rs 550). Average selling price at Rs 454,472 was up 11.2% YoY, 6% QoQ driven by price hikes taken during the quarter. Including MVML net sales were Rs 82.1 bn (in line with our est. of Rs 82 bn). Standalone APAT at Rs 6.3bn (our est. Rs 6.7bn) was impacted by higher depreciation expense and higher tax rates. Depreciation expense at Rs 1.4bn was higher than our est. of Rs 1.2bn. Effective tax rate at ~27.6% was also higher than our est. of ~24%. Interest expense and other income at Rs 68 mn/Rs 408mn were in line with est. APAT incl. MVML at Rs 6.8bn was ~1% below est. of Rs 6.9bn again driven by higher depreciation and interest expense"

"We lower our volume estimates largely led by tractor segment. We factor in 5% YoY growth in FY13 vs ~12% earlier for tractors. In automotive, we factor in 16.7% YoY growth in domestic UV segment vs 17.2% earlier. Our net sales est. is revised downwards by 0.7%/5.8% in FY12/13. We factor in margin pressure in the standalone business due to higher production in MVML and input cost pressures. We lower our EBITDA margin est. by 90 bps in FY13 to 10.9%. We lower our net profit for M&M by ~5%/15% in FY12/13 to Rs 26.4bn/Rs 28bn due to lower volumes and higher profitability at MVML (for detailed P&L, refer page no 6). We would prefer to look at combined profits of both the entities rather than analyzing each of them separately. We have valued the company on SOTP basis. We have valued the standalone business at Rs 603 (down ~15%) which implies ~7.5x FY13E EV/EBIDTA. We retain our value for MVML at Rs 65 per share, implying EV/EBIDTA of 7.5 xs. We have valued the listed subsidiaries and Tech Mahindra at Rs 147 per share," says Emkay Global Financial Services research report. 

Public holding more than 90% in Indian cos

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To read the full report click on the attachment