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Mahindra & Mahindra – Comments from RBS India Access
M&M presented in RBS conference. Key highlights were : 1. Eased concerns on excise duty
hike on SUVs 2. Improved visibility of normal monsoon for tractor business 3. Capacity
constraints overcome to support growth from new model launch. With attractive valuation, we
keep it as top pick in auto sector.
New product launches remain key driver to sustain high market share in SUVs
Company launched 5 new products in Automotive division in FY11F (Gio, Maximmo,
Refreshed Bolero pickup, Genio, Navistar 25 ton truck).
Management reiterates new SUV launch before festivals, which will be positioned above
Scorpio.
Ssyangyong Motors Korando is planned for FY12F launch to further expand its product
price points.
The maintenance of Excise Duty at current levels is a big relief to the sector and
especially for diesel vehicles, where Kirit parekh committee had recommended higher
duty to compensate for subsidised diesel prices.
US pick-up truck export plans have taken a back seat, focus is to turnaround
Ssyongyong in global markets.
Tractor segment to benefit from normal monsoon projection
The prolonged rainfall in FY11F has been helpful in improving water table for the country.
Further, with normal rainfall projected for FY12F, tractor industry should be able to record
11% volume growth.
The recent budget announcement of linking NAREGA wages to Consumer Price Index (CPI)
should help drive further mechanisation of farms as labour becomes costly and availability /
productivity issues crop up.
Consolidating with Punjab Tractors helped in improving its market share by 300bps over last
4-years to 41.8% in YTDFY11F as it helped it establish strong foothold of 1,300 dealers and
2,200 service centres.
The small tractor Yuvraj has been attracting good response in Maharashtra and Gujarat,
which will be gradually rolled across the country. Andhra Pradesh, Madhya Pradesh and
Karnataka will be next round of states planned for Yuvraj launch.
Cost pressures to challenge high profit margins
The rising prices of steel and rubber remain key concerns on cost pressure. It feels, operating
leverage and internal cost controls can still extend some benefit to reduce impact from rising
commodity costs, before the pricing action is taken-up.
ESOP issue seems to subsided, as very few queries came on it. Management highlighted the
need to retain talent for achieving higher than sector growth rates. With costs being spread
over longer period of 10 years, impact on PAT will be marginal.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra & Mahindra – Comments from RBS India Access
M&M presented in RBS conference. Key highlights were : 1. Eased concerns on excise duty
hike on SUVs 2. Improved visibility of normal monsoon for tractor business 3. Capacity
constraints overcome to support growth from new model launch. With attractive valuation, we
keep it as top pick in auto sector.
New product launches remain key driver to sustain high market share in SUVs
Company launched 5 new products in Automotive division in FY11F (Gio, Maximmo,
Refreshed Bolero pickup, Genio, Navistar 25 ton truck).
Management reiterates new SUV launch before festivals, which will be positioned above
Scorpio.
Ssyangyong Motors Korando is planned for FY12F launch to further expand its product
price points.
The maintenance of Excise Duty at current levels is a big relief to the sector and
especially for diesel vehicles, where Kirit parekh committee had recommended higher
duty to compensate for subsidised diesel prices.
US pick-up truck export plans have taken a back seat, focus is to turnaround
Ssyongyong in global markets.
Tractor segment to benefit from normal monsoon projection
The prolonged rainfall in FY11F has been helpful in improving water table for the country.
Further, with normal rainfall projected for FY12F, tractor industry should be able to record
11% volume growth.
The recent budget announcement of linking NAREGA wages to Consumer Price Index (CPI)
should help drive further mechanisation of farms as labour becomes costly and availability /
productivity issues crop up.
Consolidating with Punjab Tractors helped in improving its market share by 300bps over last
4-years to 41.8% in YTDFY11F as it helped it establish strong foothold of 1,300 dealers and
2,200 service centres.
The small tractor Yuvraj has been attracting good response in Maharashtra and Gujarat,
which will be gradually rolled across the country. Andhra Pradesh, Madhya Pradesh and
Karnataka will be next round of states planned for Yuvraj launch.
Cost pressures to challenge high profit margins
The rising prices of steel and rubber remain key concerns on cost pressure. It feels, operating
leverage and internal cost controls can still extend some benefit to reduce impact from rising
commodity costs, before the pricing action is taken-up.
ESOP issue seems to subsided, as very few queries came on it. Management highlighted the
need to retain talent for achieving higher than sector growth rates. With costs being spread
over longer period of 10 years, impact on PAT will be marginal.
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