13 January 2011

RBS:: Mahindra & Mahindra – Top management meeting takeaways

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M&M top management guides for FY12F industry volume growth of 11% and 15% for tractors
and automotive, respectively, which is in line with RBS estimates. We believe the launch of new
SUV and geographical expansion of Yuvraj tractors will be key volume drivers in FY12F.
Reiterate Buy.
Automotive division - new products Maxximo, Navistar trucks to drive growth
Management guides for industry growth of 15-18% for FY12F.
The recently launched Maxximo (competitor to Tata ACE) has gained traction to record 4,000
per month sales volume rate, which management is confident of improving further in FY12F,
in spite of discounts offered by leader Tata ACE.
Delayed Navistar truck launch is expected to pick up momentum in FY12F with expansion of
product portfolio to cover 45 tonne truck and tippers.
With Premium SUV launch planned in CY11 (above Scorpio), the company plans to tap fast
improving Indian consumer taste. But small market size (2000 per month industry) limits
benefits on its total sales volume.


Tractor industry growth to be outshined with its Yuvraj product
Management guides for industry volume growth of 11% in FY12F vs RBS est. of 11.8% for
M&M tractors.
New product Yuvraj has inched up to clock 700 tractors per month now as it was launched
only in Gujarat and Maharashtra. Management plans to launch it phase-wise across the
country as the customer response has been good and nearly 65% of customers are first-time
tractor buyers. But it will continue to outsource production.
Management says, even though tractors is a high-profit margin business, in an inflationary
environment it is difficult to sustain profitability.

Supply chain constraints successfully overcome to feed the demand
M&M has started importing castings from China for its automotive division to feed the sharp
rise in demand. Similarly, for tyres it's looking at global sourcing to overcome Indian supplier
constraints.
The fuel injection constraint has been completely overcome, as Bosch has put in place
capacity to support demand.

Plans entry into construction equipments in coming months.
With the launch of Backhoe loaders manufactured in Chakan plant and engines sourced from
the tractor division, it plans to leverage tractor dealers in the segment to build volume.

Ssangyong Motors Korea (70% M&M owned)
It had excellent December monthly sales volume. With good customer response to new
product Korando, management plans to record high volume growth in CY11 (CY10 volume
was 82,000).

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