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Sep 25, 2012, 07.55 AM IST | Source: Moneycontrol.com

Buy M&M; target of Rs 922: Hedge Equities

Hedge Equities is bullish on Mahindra and Mahindra and has recommended buy rating on the stock with a target of Rs 922 in its September 11, 2012 research report.

Hedge Equities is bullish on Mahindra and Mahindra  (M&M) and has recommended buy rating on the stock with a target of Rs 922 in its September 11, 2012 research report.

“Mahindra & Mahindra Limited (MML) is India’s leading automobile and farm equipment manufacturer that enjoys leadership in the UV (Utility Vehicle) segment and the tractor segment (global leader). The company also derives value as a holding company. MML is India’s leading UV manufacturer and through its collaboration with its Korea based sub- Ssanyong Motors, is very well positioned to cater to global standards and demand for SUVs. Going forward, the company is developing its expertise in alternate fuel vehicles and its stake in electrical vehicle major- Reva puts it in a very enviable position to fulfill the inevitable demand for alternate fuel vehicles. In the near term MML has 4 new launches due to be released in FY13. MML enjoys world leadership in the tractor market and follows a more holistic and comprehensive strategy in servicing its farm equipment target market. This consequently results in deep and more loyal relationships with its clientele.”

“In February 2011, MML bought a 38% stake in the micro irrigation company-EPC Industries and in June 2012 increased this stake even further to 54%. The entry of MML into the micro irrigation business is a very good fit for the company’s farm equipment division as it is in keeping with the division’s objective of strengthening ‘farm tech prosperity’ and empowers MML to offer a more comprehensive offering to its farm equipment clientele. EPC Industries is considered to be amongst the top 5 micro irrigation players in the country and this is a market that is believed to be valued at around Rs.3000 crores and growing at an annual rate of 40% (Source: DNA India) . The synergistic benefits of this deal are likely to put MML in a very good position to strengthen its market share. While EPC is renowned for its pioneering technology it falls short on scale.”

“One of the biggest success stories of MML this year has been the XUV500 that has galvanized MML’s topline not just through the average price realization (the XUV500 is the highest priced vehicle of the standalone automotive business) but also through extremely robust sales volumes as well .At the end of July the company had sold 32000 units with a pending order book of 20000 units (in early September 2012 MML stated that the pending order book was around 15000 units that was likely to be met by November 2012) that is likely to hold for the next 6 months). While the UV boasts of superior styling, features and power what has really swung the tide in MML’s favour is the attractive pricing. At a price range of Rs.11-Rs.14 lakh most industry experts suggest that the XUV500 is a real value proposition”

“In February 2011, MML bought a 38% stake in the micro irrigation company-EPC Industries and in June 2012 increased this stake even further to 54%. The entry of MML into the micro irrigation business is a very good fit for the company’s farm equipment division as it is in keeping with the division’s objective of strengthening ‘farm tech prosperity’ and empowers MML to offer a more comprehensive offering to its farm equipment clientele. EPC Industries is considered to be amongst the top 5 micro irrigation players in the country and this is a market that is believed to be valued at around Rs.3000 crores and growing at an annual rate of 40% (Source: DNA India) . The synergistic benefits of this deal are likely to put MML in a very good position to strengthen its market share. While EPC is renowned for its pioneering technology it falls short on scale. The company lacks large manufacturing capacity and working capital support is quite limited, as is its distribution network. MML with its superior size, brand and network across the agrarian lands of the cou try can help EPC build scale tap into the potential of this ever growing market, one can buy Mahindra and Mahindra with a target of Rs 922, “says Hedge Equities research report.

Shares held by Mutual Funds/UTI

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