Angel Broking:: Mahindra & Mahindra Nov ’10: Tractors, pick-ups impress again; Buy

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Mahindra & Mahindra
Nov ’10: Tractors, pick-ups impress again; maintain Buy

 Growth on track. M&M’s Nov ’10 volumes grew 26.9% yoy
(lower 24% mom) to 44,661 units (above expectations). Tractors
and pick-ups were the key growth drivers in the month.


 Passenger utility vehicle sales steady. As per its new reporting
format, M&M’s domestic passenger UV sales grew 6.3% yoy
(mom dip of 28%). Exports grew 24.8% yoy (lower 25.1% mom).

 Tractor volumes impress. In 1HFY11, the tractor segment faced
capacity constraints at the vendor end; these appear to be easing.
In November, tractor volume growth sustained the momentum
displayed in October, with sales growth of 42.9% yoy (lower
25.9% mom).

 Four-wheel pick-ups maintain momentum, with the segment
being the key growth driver apart from tractors. Besides healthy
demand for the Maxx pick-up, Maxximo too is doing well.
 Three-wheelers. Three-wheeler volumes increased 8.5 yoy (lower
17.4% mom).

 Outlook & valuation. We remain positive on M&M. Our
existing volume growth estimate for M&M’s UVs and tractors is
at 16% and 14% respectively. Our SOTP-based target price is
`899. Maintain Buy. Key risks are possibility of higher interest
rates and negative surprises from the overseas acquisition.