Buy Mahindra and Mahindra; target of Rs 572: Emkay Global Financial
Emkay Global Financial is bullish on Mahindra and Mahindra has recommended buy rating on the stock with a target price of Rs 572 in its research report dated June 12, 2020.
June 16, 2020 / 09:49 PM IST
Emkay Global Financial's report on Mahindra and Mahindra
Q4FY20 revenue declined 35% yoy to Rs90bn (est. Rs86bn). EBITDA margin expanded by 10bps to 13.6%, above estimates of 11.2%, due to a change in inventory and cost saving initiatives. Considering the lockdown and hopes of gradual pickup in demand, we cut FY21 volume estimate by 15% to 0.60mn units, but broadly retain FY22E volume at 0.79mn units. We expect recovery from H2FY21 on a low base, pent-up demand and better rural sentiment. Domestic tractor volume growth turned positive in May'20, and the momentum is expected to continue on a low base, pent-up demand and better customer sentiment. We expect marginal growth of 1% in FY21E and 13% in FY22E.
We are positive on MM due to large exposure to rural demand and management efforts to tighten capital allocation norms. We maintain Buy, with a TP of Rs572 (Rs490 earlier), based on 15x Core P/E (13x earlier), and value of investments at Rs146/share.
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