Mahindra & Mahindra Ltd. Complexities increase, Retain BUY: Emkay

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Mahindra & Mahindra Ltd.

Complexities increase, Retain BUY

BUY

CMP: Rs 665                                       Target Price: Rs 810

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n     Results below est. EBIDTA at Rs 8.6bn (est. of Rs9.8bn) was affected due to higher staff cost (ESOP amortization),  lower VAT set off and higher production in MVML (100% subsidiary)

n     Ramp up in MVML visible with 4QFY11 EBIT account for 10% of standalone EBIT. However, value is not getting captured due to limited information and complex structure

n     Lower FY12 EPS by 10% to Rs 42. Lower EBIDTA margins est. by 170 bps to 13% due to ESOP (40bps), VAT (70bps) and higher production at Chakan (40 bps)

n     Introduce FY13 est. with an EPS of Rs 50, Retain BUY with a SOTP value of Rs 810 down 2.4%) based on FY13 estimates.  Stock to underperform till clarity emerges on margins