Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra & Mahindra (MAHM.BO)
Sell Equity Research
In line with expectations: Valuation vulnerable to demand cycle; Sell
What surprised us
Mahindra & Mahindra (M&M) reported consolidated FY11 EBITDA of
Rs60.7bn, up 8% yoy, about 2% above GS estimate, and 8% above
Bloomberg consensus estimates. Excluding an exceptional item of Rs2bn,
adjusted net income was up 29% yoy and about 4% above GS and
consensus estimates. The company reported a sequential decline in
quarterly EBITDA margins at its auto and FES divisions by 50bp and 90bp,
respectively, mainly driven by an increase in commodity costs. During the
analyst meeting, management indicated the M&HCV business and
Ssangyong integration are important strategic priorities for the auto
division in FY2012, and articulated expectations of 11%-13% yoy for tractor
demand growth for FY12. Management also highlighted macroeconomic
headwinds on account of inflation and interest rate cycle and high fuel
prices as key challenges.
What to do with the stock
We believe high inflation poses downside risks to sector valuation
multiples, particularly for M&M, which is trading above historical averages
implying higher stock price vulnerability to disappointments (refer
“Increasing cyclical risks; downgrading Hero Honda, M&M to Sell,” dated
January 27, 2011). We maintain our Sell rating on M&M as we see higher
relative upside among other stocks in our India auto coverage. Our 12-
month FY12E P/E-based TP of Rs643 remains unchanged. Key risks: Strong
near-term demand momentum continuing despite high inflation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra & Mahindra (MAHM.BO)
Sell Equity Research
In line with expectations: Valuation vulnerable to demand cycle; Sell
What surprised us
Mahindra & Mahindra (M&M) reported consolidated FY11 EBITDA of
Rs60.7bn, up 8% yoy, about 2% above GS estimate, and 8% above
Bloomberg consensus estimates. Excluding an exceptional item of Rs2bn,
adjusted net income was up 29% yoy and about 4% above GS and
consensus estimates. The company reported a sequential decline in
quarterly EBITDA margins at its auto and FES divisions by 50bp and 90bp,
respectively, mainly driven by an increase in commodity costs. During the
analyst meeting, management indicated the M&HCV business and
Ssangyong integration are important strategic priorities for the auto
division in FY2012, and articulated expectations of 11%-13% yoy for tractor
demand growth for FY12. Management also highlighted macroeconomic
headwinds on account of inflation and interest rate cycle and high fuel
prices as key challenges.
What to do with the stock
We believe high inflation poses downside risks to sector valuation
multiples, particularly for M&M, which is trading above historical averages
implying higher stock price vulnerability to disappointments (refer
“Increasing cyclical risks; downgrading Hero Honda, M&M to Sell,” dated
January 27, 2011). We maintain our Sell rating on M&M as we see higher
relative upside among other stocks in our India auto coverage. Our 12-
month FY12E P/E-based TP of Rs643 remains unchanged. Key risks: Strong
near-term demand momentum continuing despite high inflation.
No comments:
Post a Comment