SPA Research's research report on M&MM&M's Q3FY16 results were inline with estimates on the topline at INR 110 bn but bottomline, at INR 7.6 bn came in sharply lower than estimates due to lower other income which was down 60.6% YoY at 1.5 bn. The company has launched 9 products YTD which are expected to aid sharp recovery in volumes (CAGR of ~18.5% and 7.8% for UVs and LCVs respectively) between FY15-17E. We maintain our HOLD rating on the stock with SOTP based target price of INR 1283. M&M's Automobile segment volumes are expected to grow by 15.7% in FY17E primarily led by demand for new launches. On the farm equipment side, tractor volumes are expected to grow at 16.2% in FY17E on the prospects of better monsoon (after 2 consecutive years of tepid rainfall). For its new UV launches, M&M is keeping the price competitive, which is expected to cap upside in margin. We expect revenue & profit to grow at a CAGR of 14.7% & 17.7% respectively between FY15- 17E. Inspite of the positive factors, we maintain our Hold rating on the stock as the CMP prices in most of the benefits that may accrue to M&M over the next 1 year. We have a target price of INR 1283 based on SOTP valuation method. 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.
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