Buy Mahindra and Mahindra; target Rs 862: SPA Research
SPA Research is bullish on Mahindra and Mahindra (M&M) and has recommended buy rating on the stock with a target price of Rs 862 in its August 09, 2012 research report.
August 18, 2012 / 15:32 IST
SPA Research is bullish on Mahindra and Mahindra (M&M) and has recommended buy rating on the stock with a target price of Rs 862 in its August 09, 2012 research report.
“Mahindra and Mahindra (M&M) reported better than expected set of numbers, led by better product mix & improved realizations. Revenues for the quarter were aided by strong growth in volumes of Utility Vehicles & Pick-ups. EBITDA margin expanded by 190 bps on a sequential basis, led by cost control measures taken up by the Company, thereby boosting profitability. M&M reported net sales of INR 9367 mn, up by 39.3% YoY & almost flat on QoQ basis. Revenues for the quarter were aided by strong growth in volumes of Utility Vehicles (up 32% YoY) & Pick-ups (up 26.9% YoY) in Q1FY13 and also because of better product mix & improved realizations. The Company has taken a price increase of 1.5% in automotive segment & 3% in the tractor segment during April 2012 aiding realizations. Profits for the quarter at INR 7256 mn was up by 19.9% YoY & were down by 5.3% QoQ.M&M reported volumes of 182149 units in Q1FY13, up by 14.4% YoY (down by 0.3% QoQ). This was led by strong growth in automotive volumes to 122571 units, up by 23.8% YoY & down by 6.1% QoQ. Performance in tractors segment was hit by lower demand in key areas like A.P & Punjab. Tractors volumes at 59578 units de-grew by 1.0% YoY (up by 14.2% QoQ). Average Selling Price (ASP) in automotive segment stood at INR 512246/unit, up by 31.5% YoY & 1.1% QoQ. ASP's in tractors segment stood at INR 516682/unit, up by 8.8% YoY & down by 2.4% QoQ. Margins in Q1FY13 expanded by 152 bps on a sequential basis (down by 147 bps YoY) to 11.84%, led by lower than expected other operating expenses which at 8.2% of sales were down by 130 bps QoQ (60 bps YoY). EBITDA margin of M&M+MVML stood at 13.91%, up by 191 bps QoQ (down by 39 bps YoY). This was also led by strong sustenance in EBIT margin in the Tractors segment, which at 15.67%, de-grew by 34 bps YoY & 5 bps QoQ.The company has been able to outperform the automobile sector in Q1FY13 largely on the back of new launches, better product mix and strong demand in its UV's & pick-ups segment. With the ramp up of capacity at Chakan, strong demand for XUV5OO, new launcheslined-up in the coming months, we remain positive on the Company. We expect M&M's standalone revenues & profits to register a CAGR of 16.2% & 12.9% respectively over FY12-FY14E. Using SOTP valuation, we retain our "BUY" recommendation on the stock with a target of INR 862 over a period of 15 months,” says SPA Research report.Quarterly Shifts by Morgan Stanley 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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