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India Equity Research Reports, IPO and Stock News
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Mahindra & Mahindra (MM)
Automobiles
Tractors make hay. Our discussions with tractor financiers suggest that the tractor
industry is likely to post strong growth in FY2012E. We also highlight that South and
West India’s tractor growth is outpacing industry growth which has resulted in increase
in M&M’s market share in 1QFY12E. We believe M&M is likely to gain 150 bps market
share in FY2012E. We maintain our BUY rating on the stock and increase target price to
Rs800 (from Rs780 earlier).
South and West India’s tractor volume growth outpaces North India in 1QFY12
Mahindra and Mahindra has gained 220 bps market share yoy in 1QFY12 driven by strong growth
in West and South India where M&M has close to 48-54% market share higher than its overall
market share of 43%. South and West regions have grown by 38% and 25% yoy, respectively, in
1QFY12 while North has grown at a muted 1.1% yoy and East has seen a decline of 2.5% yoy in
1QFY12. Tamil Nadu, Karnataka and Andhra Pradesh have grown in the range of 35-60% yoy in
1QFY12 while Gujarat has grown by 79% yoy in 1QFY12.
M&M has a dominant market share in these regions which has led to an increase in its market
share in 1QFY12. Escorts has lost market share to TAFE and M&M. We believe M&M is likely to
gain 150 bps market share in FY2012E driven by strong growth in states where M&M has a
dominant presence. We forecast 13% yoy growth in domestic tractor volumes in FY2012E and
17% yoy growth in domestic tractor volumes for M&M.
Tractor mix shifts towards 30-40 HP in 1QFY12
In 1QFY12, share of 30-40 HP segment has increased by 60 bps while share of >30 HP segment
continued to decline. >41 HP segment share also fell slightly. Share of >41 HP segment has
increased by 15% over FY2002-2011 driven by – (1) use of implements to improve farm
productivity which require higher power to operate and (2) increasing use of tractors in
construction work which also requires greater power. Hence, we believe this mix shift towards 30-
40 HP segment could be an aberration as the use of implements is increasing at a fast rate and the
need for higher horsepower tractors will continue to rise in India.
Maintain our BUY rating and increase target price to Rs800 (earlier 780)
We maintain our BUY rating on the stock as we expect M&M’s strong volume growth to continue
driven by market share gains in both utility vehicle and tractor segment. We have increased our
tractor volume estimates by 3% over FY2012E as we believe M&M is likely to gain market share in
the tractor segment.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra & Mahindra (MM)
Automobiles
Tractors make hay. Our discussions with tractor financiers suggest that the tractor
industry is likely to post strong growth in FY2012E. We also highlight that South and
West India’s tractor growth is outpacing industry growth which has resulted in increase
in M&M’s market share in 1QFY12E. We believe M&M is likely to gain 150 bps market
share in FY2012E. We maintain our BUY rating on the stock and increase target price to
Rs800 (from Rs780 earlier).
South and West India’s tractor volume growth outpaces North India in 1QFY12
Mahindra and Mahindra has gained 220 bps market share yoy in 1QFY12 driven by strong growth
in West and South India where M&M has close to 48-54% market share higher than its overall
market share of 43%. South and West regions have grown by 38% and 25% yoy, respectively, in
1QFY12 while North has grown at a muted 1.1% yoy and East has seen a decline of 2.5% yoy in
1QFY12. Tamil Nadu, Karnataka and Andhra Pradesh have grown in the range of 35-60% yoy in
1QFY12 while Gujarat has grown by 79% yoy in 1QFY12.
M&M has a dominant market share in these regions which has led to an increase in its market
share in 1QFY12. Escorts has lost market share to TAFE and M&M. We believe M&M is likely to
gain 150 bps market share in FY2012E driven by strong growth in states where M&M has a
dominant presence. We forecast 13% yoy growth in domestic tractor volumes in FY2012E and
17% yoy growth in domestic tractor volumes for M&M.
Tractor mix shifts towards 30-40 HP in 1QFY12
In 1QFY12, share of 30-40 HP segment has increased by 60 bps while share of >30 HP segment
continued to decline. >41 HP segment share also fell slightly. Share of >41 HP segment has
increased by 15% over FY2002-2011 driven by – (1) use of implements to improve farm
productivity which require higher power to operate and (2) increasing use of tractors in
construction work which also requires greater power. Hence, we believe this mix shift towards 30-
40 HP segment could be an aberration as the use of implements is increasing at a fast rate and the
need for higher horsepower tractors will continue to rise in India.
Maintain our BUY rating and increase target price to Rs800 (earlier 780)
We maintain our BUY rating on the stock as we expect M&M’s strong volume growth to continue
driven by market share gains in both utility vehicle and tractor segment. We have increased our
tractor volume estimates by 3% over FY2012E as we believe M&M is likely to gain market share in
the tractor segment.
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