Accumulate M&M; target of Rs 1368: PLilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher`s research report on Mahindra and Mahindra“Mahindra & Mahindra’s (M&M’s) Q2FY15 operating performance was below our estimate on account of higher other expenses leading to 140bps YoY decline in EBIT margins. Management attributed the increase in cost to launch expenses and higher customer acquisition cost (indicating higher ad spends/discounts). The company indicated new launches in the compact UV segment in CY15 based on two new platforms. On tractors, management seem to caution regarding the earlier guidance of 5% growth. We are building in a ~7.0% decline in volumes in FY15E and 14.5% volume growth in FY16E for the Automotive segment. At the same time, we expect tractors to grow at a 6.5% CAGR over the next two years. With muted earnings CAGR of ~9% over FY14‐FY16E period, valuation at 16.5x FY15E and 13.5x FY16E seems fair. We maintain Accumulate with an SOTP based TP of Rs1,368.” “Standalone top‐line grew by 6.9% YoY to Rs95.4bn, mainly on account of 8.8% YoY improvement in ASP/Vehicle. Raw material/sales ratio was flat YoY, mainly reflecting lower commodity cost, richer product mix (tractors accounted for 33.9% of volumes v/s 33.6%) and lower volumes at MVML (led to lower purchase of traded goods). This was negated by a 170bps increase in other expenditure on account of higher launch expenses (3 launches) and higher customer acquisition cost (indicating higher ad spends / discounts). As a result of the above, EBITDA margin declined by 220bps YoY to 10.6%. EBITDA for the quarter declined by 11.9% to Rs10.0bn (PLe‐Rs11.3bn). Revenue grew by 6.9% YoY to Rs95.4bn, whereas, EBITDA margin declined by 150bps YoY to 12.0%. As a result, EBITDA for the combined entity de‐grew by 6.6% YoY to Rs11.0bn (PLe: Rs12.3bn). On account of higher other income (higher dividend from subsidiaries), the PAT for the quarter grew by 1.7% YoY to Rs9.7bn in line with our estimate.” “We expect combined entity i.e. M&M + MVML profit to be higher by ~5‐6% of the standalone profit in FY15E and FY16E. We value the combined entity at 14.0x FY16E EPS of Rs71.0 at Rs1,004/share and subsidiaries at Rs364/share. We maintain ‘Accumulate’ with an SOTP based TP of Rs1,353,” says Prabhudas Lilladher research report.  

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