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

Motilal Oswal is bullish on Mahindra and Mahindra (M&M) and has recommended buy rating on stock with a target of Rs 973 in its August 9, 2012 research report.

“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. Shares held by Central Governments/State Governments Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

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