July 07, 2016 / 14:09 IST
Motilal Oswal's research report on M&M
The monsoon plays an important part in MM’s fortunes, as the rural market contributes ~56% to revenue, 72% to standalone PAT and ~64% to SOTP value. After a four-year gap, we expect both the businesses – Tractors and UVs – to deliver ~14.5% volume CAGR over FY16- 18 (v/s flat volumes over FY14-16). This would be supplemented with recovery in key subsidiaries like MMFS, TECHM and Ssangyong.
The worst is over for MM not only in its core businesses of Tractors (driven by normal monsoon) and UVs (driven by recent launches), but also in key subsidiaries. We expect ~34% CAGR in consolidated EPS over FY16-18 (v/s a decline of ~14% per year over FY14- 16). The stock trades at 17.5x FY18E standalone EPS, 15.3x FY18E consolidated EPS, and 5.2% FY18E FCF yield. Considering the strong earnings cycle ahead, we upgrade the stock from Neutral to Buy. Our SOTP-based target price is ~INR1,724 (16x FY18E core EPS + subsidiaries at 20% HoldCo discount).
For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Read More
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
