Buy Mahindra & Mahindra Jan’11 – Robust performance across segments; Anand Rathi

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Mahindra & Mahindra
Jan’11 – Robust performance across segments; Buy
M&M’s Jan’11 volume growth was above expectations, at 21.7%
yoy (and 13.5% mom) to 57,217 units. Growth in all segments
was strong.

 Passenger UV growth stronger in exports. M&M’s domestic
passenger UV sales grew 11.4% yoy (9.4% mom), while exports
showed a strong 47.5% yoy growth (13% mom). Both Domestic
and Exports growth rates were better than expected.
 Continued strength in tractor volumes. The easing of capacity
constraints in tractors at the vendors’ end continued this month as
well. In Jan, tractor volume growth was a healthy 21.4% yoy (and
25.5% mom). YTD tractor growth has also been robust, at 20.9%
yoy.
 Good yoy growth in four-wheeler pick-ups. Four-wheeler pickup
volumes grew 17.5% yoy (0.3% mom) in Jan ’11, while the
YTD FY11 growth was 45.9%.
 Three-wheeler volumes increased 36.8% yoy (4.2% mom) and
YTD 39%.
 Valuation and risks. We are positive on M&M and retain our
Buy. Our volume growth estimate for UVs and tractors is 16%
and 14% respectively. Our SOTP-target is `899. Key risks: higher
interest rates and negative surprises from overseas acquisitions.