Mahindra & Mahindra Limited (NSE:M&M) (BSE:500520)

Mahindra And Mahindra Ltd is an India-based company with operations in 18 industries that include aerospace, aftermarket, agribusiness, automotive, components, construction equipment, consulting services, defense, energy, farm equipment, finance and insurance, industrial equipment, information technology, leisure and hospitality, logistics. The Company’s business segments include Automotive Segment that comprises of sale of automobiles, spare parts and related services and Farm Equipment Segment, which includes sale of tractors, spare parts and related services. Its subsidiaries include Tech Mahindra Limited, Mahindra & Mahindra Financial Services Limited, Mahindra Investments (India) Private Limited, Mahindra Investments (International) Private Limited etc.

Official website: www.mahindra.com

Results in line with estimates: For 4QFY2015, M&M posted numbers in line of our expectations. For MM+MVML, revenues dipped 9% yoy to Rs9,123cr, largely in line with our estimate of Rs8,781cr; owing to a 16% volume decline in the quarter. Automotive volumes dipped 10% while tractor volumes dipped 30%. However, realization/vehicle grew 7% yoy on account of better mix and price hikes and to an extent limited the downslide in the top-line. On the operating front, M&M’s margin of 11% was in line with our expectations of 11.3%. The margin declined 180bp yoy given the huge volume decline and with lower contribution of the high margin tractor business in the mix. During the quarter, M&M realized a one-time gain of Rs36.4cr on account of profit on sale of long term investments. Adj Profit, at Rs550cr, largely met our expectation of Rs572 cr. Outlook and valuation: M&M is likely to witness volume recovery over the next two years (FY2016 & FY2017) in both the automotive and the tractor segment. In the automotive segment, M&M aims to introduce two new compact utility vehicles with an option of the petrol variant (so far it did not have presence in this space) enabling it to regain market share. Further it plans to launch a small commercial vehicle which would boost share in the commercial segment. We also believe that the tractor industry growth would revive from 2HFY2016 on back of indications of a normal monsoon and increased non-agri usage of tractors. M&M PAT is likely to grow at CAGR of 8% over FY2015-FY2017 period. We have broadly retained our earnings estimates. We maintain Accumulate rating on the stock with a revised SOTP based price target of Rs1,332.

Source: http://www.angelbroking.com

Results ahead of estimates: Mahindra & Mahindra (M&M)’s 1QFY2016 numbers beat our as well as consensus estimates on account of better-than-anticipated operating performance. For MM+MVML (Mahindra Vehicle Manufacturers Ltd), revenues for the quarter dipped 4% yoy to Rs9,437cr, largely in line with our estimate of Rs`9,088cr; owing to an 8% volume decline in the quarter. Automotive volumes declined 3% yoy while tractor volumes dipped 16% yoy. However, realization/vehicle grew 5% yoy on account of better mix and price hikes, thereby limiting the downslide in the top-line. The operating margin, at 14.3%, surprised positively, beating our estimates of 11.9%. Cost control initiatives, benign commodity prices and price hikes in both the automotive and the tractor segment boosted the margins. Given the robust operating performance, the Adj PAT at Rs831cr came in better than our estimate of Rs688cr. Outlook and valuation: M&M is likely to witness volume recovery over the next two years (FY2016 & FY2017) in both the automotive and the tractor segment. In the automotive segment, M&M aims to introduce two new utility vehicles with an option of the petrol variant (so far it did not have presence in this space) which will likely enable it to regain market share. Further, the recently launched small commercial vehicle “Jeeto” would boost the company’s share in the light commercial vehicle (LCV) segment. We also believe that the tractor industry growth would revive from 2HFY2016 owing to the low base of the corresponding previous period and increased non-agri usage of tractors. M&M’s PAT is likely to grow at a CAGR of 13% over FY2015-FY2017. We have increased our earnings assumptions given the margins surprise despite the muted volumes. We upgrade our recommendation to “Accumulate” with a revised SOTP based price target of Rs1,493.

Source: http://www.angelbroking.com/