Buy M&M; target of Rs 645: SPA Research

SPA Research is bullish on Mahindra and Mahindra and has recommended buy rating on the stock with a target of Rs 645, in its June 4, 2012 research report.

"M&M reported better than expected set of numbers, led by better product mix & higher realizations, inspite of lower offtake in the tractors segment. Revenues was inflated by INR 7400 mn, on account of merger of automotive business of MADPL into M&M & profits also got boosted due to lower tax incidence in the last quarter, which was on account of adjustment of unabsorbed losses at MADPL of previous years. EBITDA margin contracted by 253 bps YoY & 190 bps QoQ to 10.33%, largely due to higher input costs. We remain positive on the stock & retain our "BUY" recommendation."

"M&M reported net sales of INR 9387 mn, up by 38.7% YoY & 12.0% QoQ, aided by better product mix & higher realizations. Revenues were inflated by INR 7400 mn in Q4FY12, on account of merger of automotive business of MADPL into M&M. M&M merged automotive business of MADPL with itself in Q4FY12, with retrospective effect from 1st April, 2011 and hence Q4FY12 results are not comparable."

"M&M is the market leader in UV's & tractors in India. It lost 60 bps share in tractors industry to 41.4% in FY12 & gained 140 bps share in UV's segment to 55.1% in FY12. With the ramp up of capacity at Chakan, success of XUV5OO, several launches lined-up in the coming months and rebound in tractors sales, we remain positive on the Company. We expect M&M's standalone revenues & profits to register a CAGR of 15.9% & 12.5% respectively over FY12-FY14E. Using SOTP valuation, we retain our "BUY" recommendation on the stock with a target of INR 836 over a period of 18 months," says SPA Research report.

Institutional holding more than 40% in Indian cos

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