Dolat Capital Market's research report on Mahindra and Mahindra
Strong revenue growth and margin expansion in the farm segment, defined M&M's 2QFY21 performance, EBITDA(M&M+MVML) jumped 33% with expanded margin of 17.8% (+366bps). M&M remains our preferred bet on growing tractor sales, strong rural presence and healthy margins (driven by strong operating efficiencies, and a diversified product mix). While tractor revenue for the company witnessed a strong 33% growth in 2QFY21, autos remained weak registering 8% decline. EBIT for automotive division expanded by 70bps YoY to 6.5% while EBIT margin for FES improved by 500bps YoY to 24%. Management expect margin to taper off in Q3 led by commodity inflation and some risk of forex.
Outlook
We value the core business at Rs.534/share (15x FY23 core EPS) and subsidiaries at Rs.182/share, and maintain Accumulate rating on the stock, with a SOTP based TP of Rs.715.
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