M&M Outperform: Growth in all segments in Sep ’10 says Standard Chartered

Overall growth sustained – M&M’s September volume grew
16.7% yoy (24.4% mom) to 52,658 units (higher than our
estimate). However, the product mix displayed high mom
volatility. In the past couple of months, the company’s volume
was impacted by component shortages, which have been
sorted out, leading to high growth across all segments on an
mom basis.
Mom acceleration in UV sales growth – UV sales grew
19.6% yoy and 24.6% mom to 27,103 units. UV exports grew
86.5% yoy, while domestic UV sales were 17.4% higher yoy.
Tractor volume sustains momentum – Tractor volume grew
2.9% yoy and 30.1% mom to 17,481 units. The mom increase
is mainly due to the seasonal aspect of tractor demand, sales of
which were lower in August. Domestic tractor sales remained
flat yoy, while exports increased 88% yoy. The launch of an
ultra-cheap entry-level tractor targeted at small and marginal
farmers could potentially provide further impetus to M&M’s
tractor volume over the next 12 months.
Three-wheeler volume impressive – Three-wheeler volume
increased 40.9% yoy (18.3% mom), attributable to good
demand for the Maxximo range. The company is planning to
increase Maxximo’s capacity in the next two-three months.
LCVs, Logan sales show strong yoy growth – LCV volume
grew 53.2% yoy (22.5% mom), while Logan sales were 96%
yoy higher (-17% mom).
Valuation – YTD FY11 M&M has registered total volume growth
of 23% yoy vs. our FY11e volume estimate of 14.1%. Residual
growth rate stands at 6.4% for FY11. We maintain Outperform.