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UBS Investment Research
Mahindra & Mahindra
SYMC comes into the fold
Dr. Pawan Goenka appointed as SYMC chairman
M&M has announced new appointments in Ssangyong; 1.Dr. Pawan Goenka,
president of the auto and FES sector, has been appointed as Chairman, 2) Mr. Yooil-
Lee is the new CEO (former president and CEO of Hyundai Motor North
America) and 3)Mr. Dilip Sundaram (from M&M) is appointed as the new CFO.
SYMC is to be run by the Korean mgmt team under the leadership of the new
CEO.
Ssangyong to invest more in product development & brand building
Ssangyong has announced that it intends to increase investment in product
development by 70% YoY (~$177m) in 2011 to help strengthen the product
pipeline. In addition, it expects to increase investments in brand building in Korea
(+60% YoY to ~$35m) and overseas (+400% YoY) in 2011. We believe these
investments are critical for the long term growth of the company. Mgmt. is also
looking to harness significant synergies between the two companies.
Strong volume growth momentum to continue
Ssangyong gained market share in Q3FY11 by 20bps (refer chart 1) with
underlying volume growth of 70% YoY. The company reported 60% YoY increase
in volumes (ytd CY11). We expect volume growth of 18%/30% for FY12/13
respectively. We expect EBITDA margins to significantly improve with improving
volumes (from 2.5% in Q1’10 to 9.4% in FY13E).
Valuation: Maintain Buy, PT Rs 910
We value the standalone business at Rs660/shr, based on an average 8x FY12-13E
EV/EBITDA; its subsidiaries at Rs190/shr; and Ssangyong stake at Rs 60/shr
Mahindra & Mahindra
Mahindra & Mahindra (M&M) manufactures utility vehicles (UVs), tractors,
commercial vehicles (CVs), three-wheelers and gensets. It is India's market
leader in UVs and tractors. The autos and farm equipment divisions contributed
56% to M&M's consolidated revenue in FY09. M&M, through its joint ventures
with Navistar, manufactures and markets medium and heavy CVs in India.
M&M has subsidiaries in IT services (Tech Mahindra), financial services
(M&M Financial Services), infrastructure development (Mahindra Lifespace
Developers), hospitality (Mahindra Holidays & Resorts) and auto components.
Statement of Risk
Principal risk to M&M’s earnings estimates arise from fluctuation in vehicle
sales volumes and fluctuation in raw material cost. Other businesses in the
M&M group, viz. IT, Infrastructure, financing etc are exposed to interest rate
risk, currency risk etc.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Mahindra & Mahindra
SYMC comes into the fold
Dr. Pawan Goenka appointed as SYMC chairman
M&M has announced new appointments in Ssangyong; 1.Dr. Pawan Goenka,
president of the auto and FES sector, has been appointed as Chairman, 2) Mr. Yooil-
Lee is the new CEO (former president and CEO of Hyundai Motor North
America) and 3)Mr. Dilip Sundaram (from M&M) is appointed as the new CFO.
SYMC is to be run by the Korean mgmt team under the leadership of the new
CEO.
Ssangyong to invest more in product development & brand building
Ssangyong has announced that it intends to increase investment in product
development by 70% YoY (~$177m) in 2011 to help strengthen the product
pipeline. In addition, it expects to increase investments in brand building in Korea
(+60% YoY to ~$35m) and overseas (+400% YoY) in 2011. We believe these
investments are critical for the long term growth of the company. Mgmt. is also
looking to harness significant synergies between the two companies.
Strong volume growth momentum to continue
Ssangyong gained market share in Q3FY11 by 20bps (refer chart 1) with
underlying volume growth of 70% YoY. The company reported 60% YoY increase
in volumes (ytd CY11). We expect volume growth of 18%/30% for FY12/13
respectively. We expect EBITDA margins to significantly improve with improving
volumes (from 2.5% in Q1’10 to 9.4% in FY13E).
Valuation: Maintain Buy, PT Rs 910
We value the standalone business at Rs660/shr, based on an average 8x FY12-13E
EV/EBITDA; its subsidiaries at Rs190/shr; and Ssangyong stake at Rs 60/shr
Mahindra & Mahindra
Mahindra & Mahindra (M&M) manufactures utility vehicles (UVs), tractors,
commercial vehicles (CVs), three-wheelers and gensets. It is India's market
leader in UVs and tractors. The autos and farm equipment divisions contributed
56% to M&M's consolidated revenue in FY09. M&M, through its joint ventures
with Navistar, manufactures and markets medium and heavy CVs in India.
M&M has subsidiaries in IT services (Tech Mahindra), financial services
(M&M Financial Services), infrastructure development (Mahindra Lifespace
Developers), hospitality (Mahindra Holidays & Resorts) and auto components.
Statement of Risk
Principal risk to M&M’s earnings estimates arise from fluctuation in vehicle
sales volumes and fluctuation in raw material cost. Other businesses in the
M&M group, viz. IT, Infrastructure, financing etc are exposed to interest rate
risk, currency risk etc.
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