Buy Mahindra and Mahindra: Ventura

Ventura is bullish on Mahindra and Mahindra and has recommended buy rating on the stock, in its June 1, 2012 research report.

"Mahindra and Mahindra (M&M) reported strong revenue growth of 39.3%, which stood at Rs. 9,241.3 crore v/s Rs 6633.8 crore reported in the previous corresponding quarter. However, EBITDA for the quarter stood at Rs 969.4 crore, on the back of higher raw material costs. Consequently, EBITDA margins stood at 10.3%, down by 260 bps yoy. Exceptional items and tax benefits arising from the merger of MADPL with M&M led to 30 bps improvement in net profit margins at 9.3%. M&M posted a net profit of Rs 874.5 crore for the quarter."

"With global economic witnessing a slowdown and Indian Economy too witnessing significant headwinds in the awake of rising trade deficit, depreciating rupee and weak GDP growth, which is weighing high on consumer sentiments. Low consumer sentiment, high interest rates and rising petrol prices are hitting hard the auto industry in India, which until recently was touted as one of the fastest growing markets globally."

"M&M with new product launches and strong product portfolio is expected to grow higher than the industry rate. Despite slowdown in rural demand, we expect tractor segment to grow in line with the industry on account of normal monsoon forecast and revival of demand in H2FY12. Further, we expect the company to restrict the fall in margins on the back of better product mix. At a CMP of Rs. 645, the stock is trading at 11.1x and 9.3x its estimated FY13 and FY14 earnings estimates and we recommend a BUY on the stock," says Ventura Securities research report.

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