Edelweiss' research report on Mahindra & MahindraMahindra & Mahindra’s (M&M)* 1QFY17 EBITDA of INR14.9bn (up 11% YoY) came 4% above Street’s estimates. Key con‐call highlights: (1) tractor industry growth forecast raised to mid‐teens (from 10%), M&M to continue to outperform industry; 2) TUV3OO/KUV1OO/Bolero demand impacted by higher discounting by peers; also ban on diesel vehicle sales in Delhi is affecting sentiments; (3) in pickups, demand outlook is improving given higher rural linkages; and (4) bulk of capex to be directed towards new products and regulatory compliance (BS‐VI norms); adequate capacity in place to meet growth for next 2‐3 years.
We expect core EPS CAGR of 21% over FY16‐18. We raise our target multiple to 14x (from 13x) FY18E core EPS to reflect potential impact of rural‐led recovery. We assign cash per share of INR188, and INR426 for listed subsidiaries to arrive at SoTP‐based TP of INR 1,576. We maintain ‘BUY/SO’
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