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What’s the theme?
With a wide product range, M&M has gained a significant market share in the utility vehicle (UV) segment.
It is all set to strengthen its dominance through new launches. Forecast for a normal monsoon augurs well
for the company due to its strong rural presence. This would help the company achieve double digitgrowth
of 11% in the tractor segment during FY12. In the automotive segment too, we expect volumes to
grow in double digits at 13.2% .
What will move the stock?
1) M&M expanded its range of pickup vehicles through the launch of Genio pickup in Jan'11. It followed
this with the launch of double cabin variant of the same product, which would further help it expand its
pickup portfolio. In the UV segment, a new SUV is expected to be launched by the year end. 2) Demand for
small commercial vehicles (SCVs), the fastest-growing commercial vehicles (CV) segment remains strong
and M&M has been successful in garnering 20% market share in the segment within 18 months of launch.
3) M&M is working on turning around its recent acquisition of Ssangyong, Korea. In CY11, M&M targets
revenue of USD3bn from Ssangyong vs.USD2bn in CY10. Two SUVs from the Ssangyong Motors' portfolio
(Rexton and Korando) would be assembled at M&M's Chakan facility. 4) Through its JV with Navistar, M&M
continues to expand its sales network for commercial vehicles.
Where are we stacked versus consensus?
We expect EPS of Rs41.6 and Rs47.9 in FY12 and FY13 respectively. Our FY12 earnings estimate is
8.8% lower than consensus estimate of Rs45.6. We value M&M using SOTP at Rs836, discounting the
standalone business at 13x FY13E earnings.
What will challenge our target price?
1) Steep raw material price increases and any further fuel price increases would weaken M&M's ability to
pass on costs to the customers; 2) Increased competition in the UV segment on new launches would affect
market share; and 3) Abnormal monsoons would negatively affect rural demand
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
What’s the theme?
With a wide product range, M&M has gained a significant market share in the utility vehicle (UV) segment.
It is all set to strengthen its dominance through new launches. Forecast for a normal monsoon augurs well
for the company due to its strong rural presence. This would help the company achieve double digitgrowth
of 11% in the tractor segment during FY12. In the automotive segment too, we expect volumes to
grow in double digits at 13.2% .
What will move the stock?
1) M&M expanded its range of pickup vehicles through the launch of Genio pickup in Jan'11. It followed
this with the launch of double cabin variant of the same product, which would further help it expand its
pickup portfolio. In the UV segment, a new SUV is expected to be launched by the year end. 2) Demand for
small commercial vehicles (SCVs), the fastest-growing commercial vehicles (CV) segment remains strong
and M&M has been successful in garnering 20% market share in the segment within 18 months of launch.
3) M&M is working on turning around its recent acquisition of Ssangyong, Korea. In CY11, M&M targets
revenue of USD3bn from Ssangyong vs.USD2bn in CY10. Two SUVs from the Ssangyong Motors' portfolio
(Rexton and Korando) would be assembled at M&M's Chakan facility. 4) Through its JV with Navistar, M&M
continues to expand its sales network for commercial vehicles.
Where are we stacked versus consensus?
We expect EPS of Rs41.6 and Rs47.9 in FY12 and FY13 respectively. Our FY12 earnings estimate is
8.8% lower than consensus estimate of Rs45.6. We value M&M using SOTP at Rs836, discounting the
standalone business at 13x FY13E earnings.
What will challenge our target price?
1) Steep raw material price increases and any further fuel price increases would weaken M&M's ability to
pass on costs to the customers; 2) Increased competition in the UV segment on new launches would affect
market share; and 3) Abnormal monsoons would negatively affect rural demand
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