Edelweiss's research report on M&M
Mahindra & Mahindra’s (M&M) 4QFY16 EBITDA of INR 12.7bn (up 16%YoY) was 2% above estimate. Key highlights were: (1) KUV100 bookings at 40K since launch; UV market share has increased by 800bps to 41% since launch of TUV300/KUV100 in Q2FY16; (2) upbeat on rural demand in case of normal monsoon; likely upgrade to FY17 tractor guidance of 10% growth; (3) aiming for big play in global tractor and agri machinery industry; and (4) 2W – EBIT loss increased from INR 5.5bn in FY15 to INR 7.7bn in FY16; M&M is reworking its execution strategy.
We expect core EPS CAGR of 24% over FY16-18, driven by recovery in rural demand and benefits of new launches. In UVs, we expect M&M to introduce various engine options (diesel/petrol) over next 12-18 months and hence maintain volume momentum. Maintain ‘BUY/SO’ with SoTP-based TP of INR 1,504 (FY18E PER of 13x to core EPS, cash per share of INR 115 and INR 440 for listed subsidiary).
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