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Mahindra reported 1Q PAT at Rs.6B (+8% yoy) which was below our
estimates but largely inline with street expectations. While revenues at
Rs67.7Bn (up +30% yoy) were driven by healthy volume sales (+22%
yoy), EBITDA margins came in below estimates at 13.3% (-130bp yoy
and +60bp qoq) as raw material costs jumped to 71.8% (+220bp qoq) over
the quarter on higher commodity prices. Lower interest income at Rs.20m
(vs. 227m yoy) and higher tax rates (up 370bps yoy), further led to the
moderation in profit growth.
Conference call takeaways: Volume outlook – Management highlighted
that volume growth for the automotive industry is likely to moderate to
10% yoy (given macro headwinds). The OEM will grow ahead of
industry given that they have a refreshed product portfolio (Maximmo,
new SUV launch, Genio pick ups). On tractors, they expect industry to
grow at 12% in FY12E. While working capital in the tractors segment
has risen considerably, management highlighted that system inventories
are at normal levels. M&M will ramp up the capacity of the Yuvraj to
1,500 units p.m. by year end. Margin outlook: While commodity prices
were inflated in 1Q, input prices are likely to ease into the year. The
OEM has taken price hikes of c.1-1.5% in both tractors and UV's
recently, which should aid profitability. On MVML: The new plant
produced 17,700 vehicles in 1Q (vs. c.5,500 units yoy). However, as the
VAT set off was not available to Mahindra, margins have been impacted
by 60bps. They are hopeful that the government of Maharashtra will
resolve this issue shortly. Capex: Management has re-iterated its capex
guidance of Rs.50B over the next three years. Ssangyong: Management
expects that as the OEM has emerged out of bankruptcy, the working
capital cycle will improve from hereon as relationships with suppliers
normalize.
Valuation and PT: We are lowering our estimates by c.3% over FY12-
13E to factor in the weaker 1Q results. We are rolling forward our PT to
Mar'12 and set a sum of parts based price of Rs.752 (in line with earlier
methodology). Key risks: Growth rates in rural India moderate sharply,
proposed taxation on diesel vehicles could impact demand.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra reported 1Q PAT at Rs.6B (+8% yoy) which was below our
estimates but largely inline with street expectations. While revenues at
Rs67.7Bn (up +30% yoy) were driven by healthy volume sales (+22%
yoy), EBITDA margins came in below estimates at 13.3% (-130bp yoy
and +60bp qoq) as raw material costs jumped to 71.8% (+220bp qoq) over
the quarter on higher commodity prices. Lower interest income at Rs.20m
(vs. 227m yoy) and higher tax rates (up 370bps yoy), further led to the
moderation in profit growth.
Conference call takeaways: Volume outlook – Management highlighted
that volume growth for the automotive industry is likely to moderate to
10% yoy (given macro headwinds). The OEM will grow ahead of
industry given that they have a refreshed product portfolio (Maximmo,
new SUV launch, Genio pick ups). On tractors, they expect industry to
grow at 12% in FY12E. While working capital in the tractors segment
has risen considerably, management highlighted that system inventories
are at normal levels. M&M will ramp up the capacity of the Yuvraj to
1,500 units p.m. by year end. Margin outlook: While commodity prices
were inflated in 1Q, input prices are likely to ease into the year. The
OEM has taken price hikes of c.1-1.5% in both tractors and UV's
recently, which should aid profitability. On MVML: The new plant
produced 17,700 vehicles in 1Q (vs. c.5,500 units yoy). However, as the
VAT set off was not available to Mahindra, margins have been impacted
by 60bps. They are hopeful that the government of Maharashtra will
resolve this issue shortly. Capex: Management has re-iterated its capex
guidance of Rs.50B over the next three years. Ssangyong: Management
expects that as the OEM has emerged out of bankruptcy, the working
capital cycle will improve from hereon as relationships with suppliers
normalize.
Valuation and PT: We are lowering our estimates by c.3% over FY12-
13E to factor in the weaker 1Q results. We are rolling forward our PT to
Mar'12 and set a sum of parts based price of Rs.752 (in line with earlier
methodology). Key risks: Growth rates in rural India moderate sharply,
proposed taxation on diesel vehicles could impact demand.
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